How much a stock's price changes over time is a significant driver for most investors. Not only can price performance impact your portfolio, but it can help you compare investment results across sectors and industries as well.
The fear of missing out, or FOMO, also plays a factor in investing, especially with particular tech giants, as well as popular consumer-facing stocks.
What if you'd invested in UnitedHealth Group (UNH) ten years ago? It may not have been easy to hold on to UNH for all that time, but if you did, how much would your investment be worth today?
UnitedHealth Group's Business In-Depth
With that in mind, let's take a look at UnitedHealth Group's main business drivers.
UnitedHealth Group, Inc. provides a wide range of health care products and services, such as health maintenance organizations (HMOs), point of service plans (POS), preferred provider organizations (PPOs), and managed fee-for-service programs.
UnitedHealth has the largest and most diverse membership base within the managed-care organization market, which gives it significant competitive advantages. It also has built its prescription drug business through OptumRx division, with the acquisition of Catamaran in 2015.
The company has acquired a number of competing healthcare providers. These acquisitions have transformed it from a pure health insurer to a comprehensive healthcare provider.
UnitedHealth reports through two segments: UnitedHealthcare and Optum. Its strategy is to meld the provision of medical care from its Optum unit with UnitedHealthcare brand insurance products, which help in cross selling of products and services.
UnitedHealthcare (contributed approximately 63% of revenues in 2020) is divided into UnitedHealthcare Employer & Individual; UnitedHealthcare Medicare & Retirement; UnitedHealthcare Community & State and UnitedHealthcare Global.
Optum (47%) is a technology-enabled health services business serving the broad health care marketplace, including those who need care: the consumers who need the right support, information, resources and products; those who provide care: pharmacies, hospitals, physicians, practices and other health care facilities.
In the fourth quarter of 2020, the company entered into agreements to acquire multiple companies, which are expected to close in the first half of 2021. Additionally, in January 2021, it entered into agreements to purchase multiple companies in the health care sector, most notably, Change Healthcare. This acquisition is likely to close in the second half of 2021. The total capital required for these acquisitions is nearly $13 billion.
Bottom Line
Anyone can invest, but building a successful investment portfolio requires research, patience, and a little bit of risk. So, if you had invested in UnitedHealth Group ten years ago, you're likely feeling pretty good about your investment today.
A $1000 investment made in May 2011 would be worth $8,204.20, or a gain of 720.42%, as of May 17, 2021, according to our calculations. This return excludes dividends but includes price appreciation.
The S&P 500 rose 212% and the price of gold increased 19.31% over the same time frame in comparison.
Looking ahead, analysts are expecting more upside for UNH.
UnitedHealth’s shares have outperformed its industry in a year. The stock has seen the Zacks Consensus Estimate for current-year earnings being revised 2% upward over the last 30 days. The top line is bolstered by new deals, renewed agreements and expansion of service offerings. Its numerous acquisitions bode well. Its solid health services segment provides significant diversification benefits. It remains well poised to gain from its government business. A sturdy balance sheet and consistent cash flow generation are other positives, which led to a solid capital position. This enables the company to engage in share buybacks and dividend payments. A strong 2021 view buoys investor optimism on the stock. However, the company is witnessing a slowdown in international and commercial business.
Over the past four weeks, shares have rallied 5.07%, and there have been 8 higher earnings estimate revisions in the past two months for fiscal 2021 compared to none lower. The consensus estimate has moved up as well.
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UnitedHealth Group Incorporated (UNH): Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
