UnitedHealth Group UNH
What does UnitedHealth Group do?
UnitedHealth Group is an integrated healthcare company based in the US. The company combines a large health insurer with a broadly positioned services business, and is thus both a payer and a care provider in the healthcare system.
The business is divided into UnitedHealthcare and the Optum platform. UnitedHealthcare offers health insurance for employers, individuals and government programs such as Medicare Advantage and Medicaid; income comes mainly from insurance premiums. Optum comprises three areas: Optum Health operates care delivery and patient support offerings, Optum Insight supplies software, data analytics and consulting to hospitals and insurers, and Optum Rx operates as a pharmacy benefit manager. Competitive advantages arise from its enormous size, extensive data holdings, the interlinking of insurance and care delivery, and broad market coverage. Competitors include other large health insurers and providers of pharmacy services and healthcare services.
Score profile
Rank vs. Healthcare Plans (9 companies). 10 = top of the group, 5 = middle. Calculated from the metrics below, without AI.
Metrics compared with the industry
On profitability and quality, UnitedHealth Group ranks among the best in the group Healthcare Plans (8.1/10). On growth, the company ranks in the middle in the group Healthcare Plans (5.0/10). On valuation (higher = cheaper), the stock ranks below average in the group Healthcare Plans (3.3/10). On financial strength, UnitedHealth Group ranks below average in the group Healthcare Plans (3.9/10).
| Metric | Stock | Group median | Ranking |
|---|---|---|---|
| Forward P/E | 17.4x | 14.2x | better than 28 % |
| Trailing P/E | 23.1x | 23.6x | better than 56 % |
| PEG ratio | 1.0x | 1.0x | better than 50 % |
| EV/EBITDA | 14.2x | 12.9x | better than 39 % |
| Price/sales | 0.8x | 0.3x | better than 17 % |
| Price/book | 3.7x | 2.6x | better than 28 % |
| Revenue growth | -0.4% | 5.4% | better than 17 % |
| Earnings growth | 76.1% | 0.0% | better than 83 % |
| Gross margin | 20.1% | 13.0% | better than 72 % |
| Operating margin | 5.8% | 2.7% | better than 83 % |
| Net margin | 3.5% | 2.1% | better than 83 % |
| Return on equity | 15.8% | 13.2% | better than 83 % |
| Debt/equity | 70.4% | 70.8% | better than 61 % |
| Current ratio | 0.7x | 1.5x | better than 6 % |
| Free cash flow yield | 7.3% | 7.3% | better than 50 % |
| Dividend yield | 2.3% | 2.1% | – |
| Payout ratio | 51.7% | 30.9% | – |
| Beta | 0.52 | 0.64 | – |
Valuation: what is UnitedHealth Group worth?
Two valuation approaches – a discounted cash flow model and a valuation at the industry’s median multiples – give UnitedHealth Group a model range of 330.87 USD to 736.86 USD per share.
25 analysts, average rating “Buy”, average price target 476.64 USD (+17.7%).
The full DCF matrix, the reverse DCF (what growth the price implies) and scenarios are part of the Pro analysis.
What the business depends on
- The number of insured members and the level of premiums, particularly in Medicare Advantage, Medicaid and employer plans, determine the revenue base.
- The ratio of premium income to benefit expenses largely decides the profitability of the insurance business.
- Optum broadens earnings through care delivery, pharmacy management and data services and is less directly dependent on claims costs.
Risks
- Rising medical costs and higher utilization of services can weigh on margins in the insurance business.
- Changes in reimbursement rates and rules of government programs such as Medicare and Medicaid have a strong effect on revenue and earnings.
- Regulatory, antitrust and political scrutiny of market power, pricing and the integrated structure carries substantial risks.
What to look for with UnitedHealth Group
The medical care ratio, i.e. the share of benefit expenses in premium income, shows how profitably the insurance business operates and how well costs are estimated.