Over the next 6 years, ModivCare shares will need to reach $43 to achieve average annual stock market performance of 9.0%. ModivCare’s stock price will need to reach $50 by 2028 to achieve upper quartile performance. At the current price of $25, what are market expectations regarding ModivCare’s future operating performance?
Executive Summary
- Price Target Research identifies ModivCare as having: below average expected growth, low financial strength, very low profitability, and low stability. Growth is a big positive influence on ModivCare’s valuation while Risk Profile is a big negative influence.
- Average valuation, lagging shareholder returns. Current valuation levels are average relative to the ModivCare Peer Group. Recent market returns have substantially underperformed the ModivCare Peer Group. Total shareholder returns expected to significantly beat the overall equity market. Based on current investor expectations, ModivCare shares should reach a level of $130 by 2028 — an 31.1% per year total shareholder return. A 2028 stock price of $43 would reflect median performance and a price of $50 would be required to reach upper quartile performance.
- Growth has been ModivCare’s biggest valuation strength. Historical growth has been very high relative to the ModivCare Peer Group and forecasted growth is relatively below average. Asset Growth, and Revenue Growth have been superior. Equity Growth has lagged. ModivCare’s historical income statement growth and balance sheet growth have diverged. Revenue growth has fallen short of asset growth; earnings growth has exceeded equity growth resulting in an improving return on equity. ModivCare’s consensus growth expectations are lower than historical growth.
- Return on Equity, Pretax ROA, and Pretax Margin are group lagging. These factors have negatively affected market perceptions of ModivCare. The company has very high excess cash and will have to work to reinvest at attractive returns to support profitability and valuation.
- ModivCare’s risk profile is very unfavorable. Overall variability has been very high with very high revenue variability, very high E.P.S. variability, Financial Strength is very low and earnings’ expectations are below average. The debt/capital ratio has risen very significantly.
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