Today we're going to take a closer look at large-cap Health Care company UnitedHealth, whose shares are currently trading at $518.76. We've been asking ourselves whether the company is under or over valued at today's prices... let's perform a brief value analysis to find out!
UnitedHealth Is Fairly Priced to Earnings but Overpriced Compared to Its Book Value:
UnitedHealth Group Incorporated operates as a diversified health care company in the United States. The company belongs to the Health Care sector, which has an average price to earnings (P/E) ratio of 30.21 and an average price to book (P/B) ratio of 4.08. In contrast, UnitedHealth has a trailing 12 month P/E ratio of 21.8 and a P/B ratio of 5.14.
UnitedHealth's PEG ratio is 1.48, which shows that the stock is probably overvalued in terms of its estimated growth. For reference, a PEG ratio near or below 1 is a potential signal that a company is undervalued.
Strong Revenue Growth With Increasing Reinvestment in the Business:
| 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | |
|---|---|---|---|---|---|---|
| Revenue (MM) | $226,247 | $242,155 | $257,141 | $287,597 | $324,162 | $359,982 |
| Revenue Growth | n/a | 7.03% | 6.19% | 11.84% | 12.71% | 11.05% |
| Operating Margins | 8% | 8% | 9% | 8% | 9% | 9% |
| Net Margins | 5% | 6% | 6% | 6% | 6% | 6% |
| Net Income (MM) | $11,986 | $13,839 | $15,403 | $17,285 | $20,120 | $21,687 |
| Net Interest Expense (MM) | $1,400 | $1,704 | $1,663 | $1,660 | $2,092 | $3,092 |
| Depreciation & Amort. (MM) | $2,428 | $2,720 | $2,891 | $3,103 | $3,400 | $3,980 |
| Earnings Per Share | $12.19 | $14.33 | $16.03 | $18.08 | $21.18 | $23.03 |
| EPS Growth | n/a | 17.56% | 11.86% | 12.79% | 17.15% | 8.73% |
| Diluted Shares (MM) | 983 | 966 | 961 | 956 | 950 | 936 |
| Free Cash Flow (MM) | $13,650 | $16,392 | $20,123 | $19,889 | $23,404 | $26,435 |
| Capital Expenditures (MM) | $2,063 | $2,071 | $2,051 | $2,454 | $2,802 | $3,293 |
| Current Ratio | 0.73 | 0.69 | 0.74 | 0.79 | 0.77 | 0.8 |
| Total Debt (MM) | $36,554 | $40,678 | $43,467 | $46,003 | $57,623 | $5,290 |
| Net Debt / EBITDA | 1.3 | 1.33 | 1.05 | 0.91 | 1.08 | -0.95 |
UnitedHealth has rapidly growing revenues and increasing reinvestment in the business and generally positive cash flows. Additionally, the company's financial statements display a strong EPS growth trend and healthy leverage levels. However, the firm has not enough current assets to cover current liabilities because its current ratio is 0.8. Finally, we note that UnitedHealth has weak operating margins with a stable trend.
