fbpx

UnitedHealth At New Highs As It Upps Guidance Once Again

Stock (Symbol)

United Health (UNH)

Stock Price

$175

Sector
Healthcare
Data is as of
April 27, 2017
Expected to Report
Jul 17
Company Description
UnitedHealth Group Incorporated is a health and well-being company. The Company’s business platforms include UnitedHealthcare and Optum. UnitedHealthcare provides health care benefits to various customers and markets. Optum is a health services business serving the health care marketplace, including payers, care providers, employers, Governments, life sciences companies and consumers. The Company’s business platforms have four segments: UnitedHealthcare, OptumHealth, OptumInsight and OptumRx. OptumHealth is a health and wellness business serving the physical, emotional and financial needs of individuals. OptumInsight provides technology, operational and consulting services to participants in the health care industry. OptumRx is a pharmacy benefit manager. Purchased Catamaran 3/30/15. Source: Thomson Financial
Sharek’s Take
David SharekUnitedHealth (UNH) continues to hit new highs as it ups guidance. And as the stock rises with the higher guidance the P/E isn’t going up — which means the stock’s still undervalued. UNH has a lot going in its favor, specifically it left Obamacare and its Optum health services division is thriving. UNH left the Obamacare program last year, which was costing the nation’s largest health insurer around 4% of profits. Also, the company has a division called Optum divisions which are multiple departments to keep you healthy:

  1. OptumHealth is a health and wellness business serving the physical, emotional and financial needs of individuals
  2. OptumInsight provides technology, operational and consulting services to participants in the health care industry
  3. OptumRx is a pharmacy benefit manager with relationships with Walgreen’s and CVS to make picking up prescriptions easy.

Optum is an added option when companies purchase UnitedHealth insurance, but companies can get it without the health insurance attached. Optum — which is around 40% of overall profits — has been disrupting the industry while signing deals and getting business left-and-right. UnitedHealth is one of the best stocks in the market today. Profits jumped 30% last qtr and 2017 estimates have risen from $9.06 to $9.79 the past 4 qtrs. UNH is also one of the world’s safest stocks. It has clean annual reports, which I appreciate, and is part of the Dow Jones Industrial Average. The Est. LTG is 15% per year plus the stock yields 2%. Management paid out more than $2 billion in dividends in 2016, and also bought back over $1 billion in shares. What’s nice is UNH has all these things going for it yet still sells for just 18x earnings –a real bargain. My Fair Value on this $175 stock is $2016 this year and $227 next.

One Year Chart
Last qtr UNH grew sales 9% and profits surged 31%, and blew past the 20% estimate. The stock went to new-highs after the news, yet still sells for 18x earnings, which is around where it has been the past 2 years. There’s a lot of green in this table — and that’s good. What I like most is the P/E of just 18Qtly profits are expected to be 21%, 18%, 18% and 5% the next 4 qtrs. Since UNH has been beating the street, I expect these figures are too low, especially the 4QtrsOut estimate which analysts now need to up after the big beat last qtr.
Fair Value
To me, this stock should sell for 21x earnings. Yet the P/E is a modest 18. That gives the stock upside in both the short term and long term. Notice how UNH had a very low P/E five-to-eight years ago. Wow it was such a bargain — yet I didn’t follow it because it wasn’t growing 20% per year. Ugh.
Bottom Line
UnitedHealth is a top-tier growth stocks for both conservative and growth investors. Profits are growing strong and with a P/E in the teens I expect this stock will continue higher. This is also one of the safest stocks in the world. UNH ranks 2nd in the Conservative Growth Portfolio Power Rankings and 7th in the Growth Portfolio and Aggressive Growth Portfolio Power Rankings.
Power Rankings
Growth Stock Portfolio

7 of 31

Aggressive Growth Portfolio

7 of 16

Conservative Stock Portfolio

2 of 33

Not a member? Sign up here for $25 a month.