Stock (Symbol) |
United Health (UNH) |
Stock Price |
$115 |
Sector |
| Healthcare |
Data is as of |
| January 31, 2016 |
Expected to Report |
| N/A |
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 |
 United Health (UNH) is expected to grow profits 20% in 2016, and sells for a reasonable 15x earnings. UNH is the nations largest health insurer and is composed of two divisions: UnitedHealthcare which is health insurance and Optum which is health services such as pharmacy benefit management, behavioral health services and data analytics. UNH sales grew a solid 20% last qtr, 10% at UnitedHealthcare and 40% at the faster growing Optum. The company recently said it loses money on Obamacare, will refrain marketing plans, and might exit the program in 2017. UNH gets a top rating of safety from Value Line and has clean annual reports. It’s expected to grow profits 14% long-term, pays out 30% of profits to pay a dividend of 2%, and management buys back stock in addition to acquiring other companies. On March 30th 2015 it acquired Catamaran, a great pharmacy benefit manager I owned for many years. With profits expected to grow 20% this year — and selling for just 15x earnings — UNH is a great stock to have in the Conservative Growth Portfolio. |
One Year Chart |
 Last qtr profits fell 15% last qtr but some of this was from one-time charges. My reports say the company made $1.40 but others say $1.77. The stock didn’t fall on the news, so we are moving forward. Qtrly profits are expected to climb 11%, 11% and 19% the next few qtrs, and these figures just increased some. 2016 profit estimates just jumped from $7.29 to $7.73 and 2017’s from $8.32 to $8.78. At 15 times earnings this stock is undervalued considering the Est LTG of 14% in addition to a 2% yield. |
Fair Value |
 I feel UNH is worth 16x earnings, which gives the stock modest upside this year, and my analysis shows a hypothetical 25% total return by next year assuming the company makes $8.78, sells for 16x earnings, and continues to pay a steady dividend. Do note the company had tough times during the last recession, and there’s a chance we could be entering a recession now. |
Bottom Line |
 UnitedHealth has a lot of great qualities. This is a safe stock with clean financials. The estimated long-term growth rate of 14% a year is solid for a conservative stock — and investors also get a yield of 2%. UNH is reasonable, selling for just 15x earnings with 20% EPS growth expected in 2016. I think the main risk here is a recession that could dampen the profit outlook. UnitedHealth ranks 24th of 34 stocks in the Conservative Growth Portfolio Power Rankings. |
Power Rankings |
Growth Stock Portfolio
N/AAggressive Growth Portfolio N/AConservative Stock Portfolio 24 of 34 |
