Deutsche Bank Reiterates Buy Rating on Magellan Health (MGLN)

Deutsche Bank is out with a research report this morning, where it reiterates its Buy rating on Magellan Health MGLN; it has a $49.00 price target on the stock. The DB analysts said that they expect the company to return a significant amount of cash to shareholders through stock repurchases over the next 12 months; they place MGLN in their “Cash Cows” category. They also noted that the company’s free cash position represent s21% of its market capitalization, with MGLN generating $203 million if FCF in 2010. They believe that total yield on the stock could be in the neighborhood of 16% over the next year. As for valuation, the analysts noted, “To determine our 12-month TP of $49, we assign a 14x multiple to our 2011 EPS forecast. This assumes shares trade at a premium to our target MCO multiple of 9-11x to reflect stronger organic growth potential, significant net cash and no LT debt. The primary risks to MGLN not obtaining our total yield forecast include acquisitions, unexpected contract losses, or adverse regulatory developments.”