Megellan Health Services - Aggressive Growth

Magellan Health Services, Inc. (MGLN) is up sharply since its latest earnings surprise. Thanks to estimate revisions, shares are still a good value and are showing stability in a rough market.

Company Description

Magellan Health Services is a health care management company servicing health plans, corporations and government agencies.

"Delightful" Results

On Jul 29 Magellan Health Services reported second-quarter results that included a 17% increase in revenue, to $742 million. Net income came in at $35.4 million, up from $18.4 million.

Earnings per share for the period were $1.05, almost doubling from 53 cents one year ago. Magellan Health Services easily beat Wall Street's expectations as the Zacks Consensus Estimates was 73 cents, making the period the fourth consecutive earning surprise.

The CEO, Rene Lerer, said "I am delighted with the second quarter and year-to-date results."

Analysts Liked the Results too.

Following the earnings release, the full-year Zacks Consensus Estimate for 2010 jumped 50 cents, to $3.64. Next year's forecasts are averaging $3.43, up 16 cents.

While there is a slight drip in 2011, that level is still well above the $3.01 earned in 2009. Rising estimates are just as or even more important that growth rates.

Good Value

Shares of MGLN are trading at less than 12 times the forward estimates. The growth prospects are fairly priced with a PEG ratio of 1.0.

The Chart

Magellan Health Services surged on after the earnings surprise and subsequent estimate revisions, but has slowed recently. However, given the market volatility shares have held up quite well.

Bill Wilton is the Growth Stock Strategist for Zacks.com. He is also the Editor in charge of the market-beating Zacks Growth Trader service
 
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