What If You Were Missing The Value In UNH Stock?

Here is why we think UNH deserves consideration as a value stock.

• Reasonable Growth: 8.1% LTM and 11.3% last 3 year average.
• Cash Generative: Nearly 6.1% free cash flow margin and 8.2% operating margin LTM.
• No Major Shocks: UNH has avoided any large revenue collapses.
• Modest Valuation: Despite encouraging fundamentals, UNH trades at a PE multiple of 12.9
• Opportunity vs S&P: Compared to S&P, you get lower valuation, higher growth, and lower margins

*LTM: Last Twelve Months

That is one way to look at stocks. Trefis High Quality Portfolio evaluates much more, and is designed to reduce stock-specific risk while giving upside exposure

Does This Work?

For 65 similar value stocks chosen as of mid 2024, consider the following stats for the subsequent 1 year period.

• Average peak return of 39.3% vs 14.4% for S&P, with maximum peak return of 133%
• Win rate of 60%; win rate represents % of stocks with positive return
• Average 1-year return of 14.6%, similar to S&P’s despite tariff instability

But Consider The Risk

That said, UNH isn’t immune to big drops. It fell 72% during the Global Financial Crisis and 42% in the Dot-Com bust. Even the milder sell-offs hit it hard – like 36% in the Covid crash, 24% in 2018, and nearly 19% during the recent inflation shock. Solid business doesn’t mean no risk. When the market turns sour, UNH can take a meaningful hit too.

The Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has a track record of comfortably outperforming the S&P 500 over the last 4-year period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.