UNH Leaps 16% In One Month, Time To Buy The Stock?

We believe there are only a couple of things to fear in UNH stock given its overall Moderate operating performance and financial condition. Considering stock’s Low valuation we think it is Attractive. Here is our multi-factor assessment.

But no matter how attractive, investing in a single stock carries high risk. Trefis High Quality Portfolio and is designed to reduce stock-specific risk while giving upside exposure

Let’s get into details of each of the assessed factors but before that, for quick background: With $313 Bil in market cap, UnitedHealth provides diversified healthcare services, including consumer health benefit plans and pharmacy care programs such as retail network contracting, home delivery, specialty pharmacy, and clinical services.

[1] Valuation Looks Low

This table highlights how UNH is valued vs broader market. For more details see: UNH Valuation Ratios

[2] Growth Is Strong

• UnitedHealth has seen its top line grow at an average rate of 11.3% over the last 3 years
• Its revenues have grown 9.7% from $385 Bil to $423 Bil in the last 12 months
• Also, its quarterly revenues grew 12.9% to $112 Bil in the most recent quarter from $99 Bil a year ago.

This table highlights how UNH is growing vs broader market. For more details see: UNH Revenue Comparison

[3] Profitability Appears Weak

• UNH last 12 month operating income was $31 Bil representing operating margin of 7.3%
• With cash flow margin of 6.8%, it generated nearly $29 Bil in operating cash flow over this period
• For the same period, UNH generated nearly $21 Bil in net income, suggesting net margin of about 5.0%

This table highlights how UNH profitability vs broader market. For more details see: UNH Operating Income Comparison

[4] Financial Stability Looks Strong

• UNH Debt was $79 Bil at the end of the most recent quarter, while its current Market Cap is $313 Bil. This implies Debt-to-Equity Ratio of 25.2%
• UNH Cash (including cash equivalents) makes up $32 Bil of $309 Bil in total Assets. This yields a Cash-to-Assets Ratio of 10.4%

[4] Downturn Resilience Is Strong

UNH has been more resilient than the S&P 500 index during various economic downturns. We assess this based on both (a) how much the stock fell and, (b) how quickly it recovered.

2022 Inflation Shock

• UNH stock fell 19.3% from a high of $555.15 on 31 October 2022 to $447.75 on 13 July 2023 vs. a peak-to-trough decline of 25.4% for the S&P 500.
• However, the stock fully recovered to its pre-Crisis peak by 17 July 2024
• Since then, the stock increased to a high of $625.25 on 11 November 2024 , and currently trades at $345.56

 
2020 Covid Pandemic

• UNH stock fell 36.2% from a high of $305.31 on 19 February 2020 to $194.86 on 23 March 2020 vs. a peak-to-trough decline of 33.9% for the S&P 500.
• However, the stock fully recovered to its pre-Crisis peak by 1 June 2020

 
2008 Global Financial Crisis

• UNH stock fell 72.4% from a high of $58.99 on 21 December 2007 to $16.30 on 20 November 2008 vs. a peak-to-trough decline of 56.8% for the S&P 500.
• However, the stock fully recovered to its pre-Crisis peak by 2 April 2012

But the risk is not limited to major market crashes. Stocks fall even when markets are good – think events like earnings, business updates, outlook changes. Read UNH Dip Buyer Analyses to see how the stock has recovered from sharp dips in the past.

The Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has a track record of comfortably outperforming its benchmark that includes all 3 – S&P 500, Russell, and S&P midcap. 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.