UnitedHealth Group (UNH)
Based in the US, UnitedHealth Group (UNH) is the world’s largest healthcare company by market cap with a staggering $500 billion capitalization. It operates across the majority of healthcare segments and owns the well-known Optum Health platform. UnitedHealth has been trending recently with a 58.82% increase in mentions over the past day, leading investors to wonder ‘is UnitedHealth Group a good investment?’. To help answer this question we’ll be reviewing the most impactful pros and cons of adding UnitedHealth to your portfolio. Currently, the price of UNH is hovering at around $520, up 3.72% YTD.
Is UnitedHealth Group a Good Investment? - Positives
There are a lot of positives to adding UnitedHealth to your portfolio, here are a few of the big ones.
As we touched on, UnitedHealth is the largest healthcare company on the planet. This, of course, comes with several benefits. Typically, larger companies are more stable and less risky, benefiting long-term investors, additionally, they can take advantage of economies of scale allowing the company to outcompete smaller businesses.
UnitedHealth has enjoyed excellent first-quarter results boasting a 14% year-on-year revenue increase bringing the new figure to $80.1 billion. Additionally, net earnings also increased by 3.4% to $5.1 billion; a testament to UnitedHealth’s ability to boost margins despite increased costs.
When a company gets to a certain size, its biggest challenge becomes growth. UnitedHealth is certainly suffering from this issue, however, a few intriguing acquisitions are set to take the company to new heights. Firstly, a $5.4 billion acquisition of LHC Group will aid UnitedHealth’s dominance in the in-home healthcare sector. Additionally, a pending $8billion acquisition of Charge Healthcare would also add significant customers to UnitedHealth’s customer base
Regardless of yield, dividends are always a nice addition to an already promising investment. UnitedHealth currently offers a 1.1% yield ($1.45 per share). Despite this figure coming in below the S&P 500 average, a positive growth outlook and consistently increasing payout ratio help to justify this lower rate.
UnitedHealth’s growth will likely continue in an upward trend due to increasing medical care costs and the occurrence of chronic diseases climbing. Furthermore, Vantage Market Research is forecasting a 4.4% annual rate of growth in the health insurance industry, with predictions as high as $3.3 trillion by 2028. Due to the sheer size of UnitedHealth, it’s in a great position to capitalize on the growing market.
Is UnitedHealth Group a Good Investment? - Negatives
A crucial part of deciding whether a particular investment is right for you is analyzing the negatives. To make this easier on our readers, we’ve included a couple of factors that could throw a wrench in UnitedHealth’s plans.
Firstly, UnitedHealth is becoming rather expensive, with a price-to-earnings ratio of 25. While this is somewhat justified by UnitedHealth’s impressive numbers, it could certainly be enough to deter value investors.
One of the main factors limiting growth for large companies is regulators. UntiedHealth’s acquisition of Charge Healthcare is currently being contested by the Department of Justice, with them claiming competition could be hurt if UnitedHealth gains access to its rivals' “competitively sensitive information”. Because of this, the merger agreement between UnitedHealth and Charge Healthcare has been extended until the end of the year, however, it’s currently unclear if it’ll end up going through.
Hype Asset of the Day - Conclusion
Overall, UnitedHealth Group is sizing up to be a great long-term investment. It has excellent growth metrics, solid financials, and a management team that seemingly understands what’s needed in order for this success to continue. While there is some resistance from the Department of Justice regarding UnitedHealth’s acquisition of Charge Healthcare, regulators stepping in to ensure the industry remains competitive is generally a sign that you’re doing pretty well. While short-term growth might be slow, UnitedHealth Group seems like a promising low-risk, long-term play. If you’re interested in finding trending stocks prior to anyone else, we recommend checking out our premium plans. Alternatively, if you want to learn more about the services offered by HypeIndex, head over to our FAQ page.
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