About UnitedHealth Group
UnitedHealth Group is the largest health insurance provider in the world (in terms of revenue).
While they have many formidable competitors such as Humana, Anthem, Centene (and others), UnitedHealth Group blows all of them out of the water in terms of annual revenue.
UnitedHealth Group (NYSE: UNH) reportedly generated $257 billion in revenue in 2020 while Anthem fell in second place, reporting approximately $122 million in total revenue.
The company covers around 146 million people across the globe which was likely due in large part to their acquisition of health care provider, Optum, in 2011. The list of recent strategic acquisitions doesn’t stop at Optum however, as later we will discuss some of the more recent purchases UnitedHealth has made.
UnitedHealth Group has a considerable moat, considerable pricing power and impacts many people’s lives. While some say UNH’s individual plans are on the more expensive side (good for investors, not great for customers), they also attest that these plans offer added benefits to the patient.
UnitedHealth Group’s numbers
UnitedHealth Group a market capitalization of just north of a whopping $500 billion.
The company is also a favorite amongst major analyst groups, as shares of UNH have increased nearly 194% over the past five years. While the company’s stock has generated fantastic returns for its investors, as the common saying goes, you have to pay to play!
Specifically, the company’s share price as of this writing is just above $530, currently offering shareholders a sizeable annual dividend of $5.80.
Sadly, you can’t go back in time (however, if you have a time machine and have figured out how to jump between spaces of time, that would be pretty cool), and as an investor, most of your thinking has to be oriented towards the future. Ultimately, the question we need to answer as responsible and objective investors is whether or not the stock is worth buying today.
Let’s dig into what has been keeping UnitedHealth Group at the top of the health insurance industry!
UnitedHealth Group’s stock technical analysis
The company’s current price to earnings ratio is 28.21, putting the company’s stock technically above what its said to be worth. However, as can be gathered from the company’s previous rate of growth, though it’s not guaranteed to continue in the future, the stock is likely to continue increasing in share price as the company maintains its global presence and expands into new markets as well.
Needless to say, it might not be the best idea to wait around for the company’s share price to drop significantly. While a recessionary period (or even depression for that matter) would likely be quite beneficial for those wanting to scoop up shares of a valuable company, investors must have patience and wait for the market to crater before jumping on the UnitedHealth Group train.
However, if one is considering waiting around to “buy the dip,” we don’t think you should necessarily be all too confident you can get this stock at a major discount, being that the stock didn’t fall by much during the onset of the COVID-19 pandemic.
If an unprecedented global health crisis isn’t going to shake the stock price much to the downside, what will?
Outside trying to buy UnitedHealth Group’s stock at a discount, it should also be noted that the company’s short interest (general market interest in betting against the stock) is the lowest of any stock we have formally analyzed (0.71 as of this report). In layman’s terms, this means there is a lot of confidence among investors when it comes to UnitedHealth Group.
As a point of reference, investors tend to get nervous when a stock’s short interest is around 4% or higher.
As we assumed, the company operates a large balance sheet, holding approximately $21 billion in cash (and cash equivalents) at the end of 2021 as well as nearly $213 billion in total assets and around $141 billion in total liabilities.
UnitedHealth Group manages quite a strong balance sheet with total assets comfortably outweighing their total liabilities.
UnitedHealth Group’s income statement
Moving over to the company’s income statement, in the past four years the company’s total revenue has steadily increased each year. This impressive by any standards.
While we are somewhat skeptical whenever a company’s total revenue drastically increases or decreases during one year while all of the other year’s total revenues are steady, this is not the case at all for UnitedHealth Group.
This is another thing we love about the company’s financials.
During the years leading up to the pandemic and subsequent years, the company’s total revenues have steadily risen while other companies, possibly in the healthcare industry, struggled to maintain growth and their operations across the globe.
UnitedHealth Group did.
Suffice it to say, if a company’s total revenue numbers are slowly and steadily rising over time instead of rising sharply one year and declining the next, I am instantly interested in the company’s stock.
I don’t want to own stocks that are volatile.
I want to sleep like a baby at night knowing that some of my money is tied up with a group of large, established companies that do what they do best.
UnitedHealth Group is a prime member of this club!
The last metric I will note in the company’s income statement is their net premiums earned over the past four years. Specifically, it appears that the company has been acquiring new customers over the past four years and will likely continue to do so. By adding more customers over time, they will likely be able to cut down some of their customer acquisition costs as more healthcare systems and networks see UnitedHealth Group as the one and only industry standard.
So far, there is a lot to like about the world’s largest healthcare company!
UnitedHealth Group’s cashflow statement
Moving onto the company’s cashflow statement, there isn’t much of a difference between the general financial tone of their income statement and cashflow statement.
Specifically, UnitedHealth Group’s net income has been steadily rising in the past four to five years, starting in 2017 at around $10.8 billion increasing to roughly $17.7 billion in 2021. At a similar rate, the company’s total cash from operations has been rising as well.
You can never have too much cash for a rainy day or when searching for acquisitions!
UnitedHealth Group’s acquisitions
Speaking of acquisitions, one of the company’s more prominent acquisitions was their purchase of healthcare provider and benefit manager, Optum. This purchase was made in 2011 and extended UnitedHealth Group’s national and global operations and capabilities.
United’s purchase of Optum also laid the foundation for Optum, owned by UnitedHealth Group at this point, to make some company purchases of their own. Specifically, Optum reportedly purchased Change Healthcare for $13.5 billion.
It’s like a Russian nesting doll style of mergers!
Just when you thought UnitedHealth Group was done making strategic and synergistic acquisitions, the company recently paid $5.4 billion for in-home health company, LHC Group.
Our team is particularly confident in this merger’s ability to create more diverse yet focused lines of revenue for the company, as much of LHC Group’s business involves in-home healthcare products and services that have been more frequently used during the pandemic.
If patients and physicians got used to this style of care, why shouldn’t it continue?
We expect the company to reap the benefits of this recent acquisition and also expect them to eye more potential purchases of other pandemic-related healthcare providers in the future.
UnitedHealth Group’s financials continued
Let’s talk a bit more about UnitedHealth Group’s ability to make money and contribute to its bottom line.
While the company’s current share price is modestly overvalued, it’s close enough to its intrinsic value (according to its price-to-earnings ratio) that it doesn’t appear to be a bad time to consider purchasing some shares. However, letting the market overall have a down day, pushing UnitedHealth Group’s stock price down isn’t a bad idea either!
But don’t get greedy. The likelihood of this stock seeing $300 again is highly unlikely in our opinion.
As assumed, the company’s annual net profit margin sits 6% higher than the industry’s margin. This simply means UnitedHealth Group is better overall at making a profit than its industry competitors.
Furthermore, the company’s annual returns on equity and assets are modestly above the industry as well. This simply means UnitedHealth Group is better at getting more out of their assets and achieving higher returns on equity than the competition.
Should you buy UnitedHealth Group stock?
UnitedHealth Group has turned out to be one of the few stocks that has little to dislike.
They dominate the industry, are generally liked by their customers and patients, have been a proven store of wealth during economic downturns and maintain various lines of strong healthcare businesses and have stellar financials.
Given the company’s past acquisitions, financial fortitude and promising future prospects, we give UnitedHealth Group a “buy” rating.
DISCLAIMER: This analysis of the aforementioned stock security is in no way to be construed, understood, or seen as formal, professional, or any other form of investment advice. We are simply expressing our opinions regarding a publicly traded entity.