United Health Group Incorporated (UNH) operates a diversified health care company in the United States.
Recently, J.P. Morgan placed the stock on its “15 vintage value” list, and I’m bullish as well. (See UNH stock charts on TipRanks)
Continued Growth
UnitedHealth’s growth continues, with year-over-year revenue growing by 14.8% in Q2. The company’s Optum and United segments were seen as the driving forces behind UnitedHealth’s stunning performance, as their revenues grew by 17.2% and 13% respectively.
UnitedHealth should continue doing well over the next 12 months due to its obscene amount of cash from operations ($20.8 billion), which drives liquidity, and allows for growth acquisitions, share buybacks, and dividends.
UnitedHealth will also benefit from its direct-to-consumer strategy via OptumStore, which is set to rival His & Hers Health.
Pricing Metrics, Valuation, Shareholder Compensation
If we observe UNH’s weighted average cost of capital of 5.4%, we can conclude that investors are confident in the firm’s ability to produce residual after debt repayments.
United Health currently trades at a discount to its sector, based on its P/E and EV/EBIT ratios. In addition, the company’s EPS is expected to grow another 11.2% by December, meaning that a $498 price is reachable based on its justified forward PE.
If you’re seeking income in addition to potential capital gains, then you’re in the right place. United Health has increased its dividend payout for 12 straight years.
Wall Street’s Take & Conclusion
Wall Street thinks UnitedHealth stock is a Strong Buy, with 15 Buy ratings, one Hold rating, and no Sell ratings assigned in the past three months. The average UNH price target of $465.75 implies 10.8% upside potential.
As mentioned earlier, J.P. Morgan placed United Health on its vintage value stocks list in August.
The stock’s pricing and valuation metrics both indicate significant upside. United Health isn’t quite a dividend aristocrat, but it’s a decent dividend play as well, if you’re seeking income in addition to capital gains.
Disclosure: At the time of publication, Steve Gray Booyens did not have a position in any of the securities mentioned in this article.
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