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UnitedHealth Group Inc Valuation – November 2018 $UNH

Company Profile (excerpt from Reuters): UnitedHealth Group Incorporated, incorporated on July 1, 2015, is a health and well-being company. The Company operates through four segments: UnitedHealthcare, OptumHealth, OptumInsight and OptumRx. The Company conducts its operations through two business platforms: health benefits operating under UnitedHealthcare and health services operating under Optum. UnitedHealthcare provides healthcare benefits to an array of customers and markets, and includes UnitedHealthcare Employer & Individual, UnitedHealthcare Medicare & Retirement, UnitedHealthcare Community & State, and UnitedHealthcare Global businesses. Optum is a health services business serving the healthcare marketplace, including payers, care providers, employers, governments, life sciences companies and consumers, through its OptumHealth, OptumInsight and OptumRx businesses.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of UNH – November 2018

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $253,928,946,752 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.69 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 149.05% Pass
6. Moderate PEmg Ratio PEmg < 20 27.73 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 4.93 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 0.69 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -1.82 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $9.52
MG Growth Estimate 11.81%
MG Value $305.75
Opinion Fairly Valued
MG Grade D+
MG Value based on 3% Growth $138.04
MG Value based on 0% Growth $80.92
Market Implied Growth Rate 9.61%
Current Price $263.95
% of Intrinsic Value 86.33%

UnitedHealth Group Inc does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the current assets. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $5.33 in 2014 to an estimated $9.52 for 2018. This level of demonstrated earnings growth supports the market’s implied estimate of 9.61% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value within a margin of safety relative to the price.

At the time of valuation, further research into UnitedHealth Group Inc revealed the company was trading above its Graham Number of $115.81. The company pays a dividend of $2.88 per share, for a yield of 1.1% Its PEmg (price over earnings per share – ModernGraham) was 27.73, which was below the industry average of 50.45, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-60.77.

UnitedHealth Group Inc scores quite poorly in the ModernGraham grading system, with an overall grade of D+.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$60.77
Graham Number $115.81
PEmg 27.73
Current Ratio 0.69
PB Ratio 4.93
Current Dividend $2.88
Dividend Yield 1.09%
Number of Consecutive Years of Dividend Growth 8

 

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2018
Total Current Assets $38,754,000,000
Total Current Liabilities $56,377,000,000
Long-Term Debt $32,053,000,000
Total Assets $151,087,000,000
Intangible Assets $68,201,000,000
Total Liabilities $98,491,000,000
Shares Outstanding (Diluted Average) 983,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $12.09
Dec2017 $10.72
Dec2016 $7.25
Dec2015 $6.01
Dec2014 $5.70
Dec2013 $5.50
Dec2012 $5.28
Dec2011 $4.73
Dec2010 $4.10
Dec2009 $3.24
Dec2008 $2.40
Dec2007 $3.42
Dec2006 $2.97
Dec2005 $2.31
Dec2004 $1.83
Dec2003 $1.34
Dec2002 $1.07
Dec2001 $0.70
Dec2000 $0.55
Dec1999 $0.40
Dec1998 -$0.14

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $9.52
Dec2017 $7.84
Dec2016 $6.24
Dec2015 $5.64
Dec2014 $5.33
Dec2013 $4.95
Dec2012 $4.43
Dec2011 $3.87
Dec2010 $3.36
Dec2009 $2.95
Dec2008 $2.74
Dec2007 $2.73
Dec2006 $2.22
Dec2005 $1.71
Dec2004 $1.31
Dec2003 $0.97
Dec2002 $0.70

Recommended Reading:

Other ModernGraham posts about the company

UnitedHealth Group Inc Valuation – February 2018 $UNH
UnitedHealth Group Inc Valuation – February 2017 $UNH
UnitedHealth Group Inc. Valuation – November 2015 Update $UNH
26 Companies in the Spotlight This Week – 11/22/14
UnitedHealth Group Inc. Annual Valuation – 2014 $UNH

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LHC Group Inc Valuation – September 2018 $LHCG
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CryoLife Inc Valuation – August 2018 $CRY
Charles River Laboratories International Inc Valuation – August 2018 $CRL
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Conmed Corp Valuation – August 2018 $CNMD
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Select Medical Holdings Corp Valuation – July 2018 $SEM

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

UnitedHealth Group Inc Valuation – February 2018 $UNH

Company Profile (obtained from Marketwatch): UnitedHealth Group, Inc. provides health care coverage, software and data consultancy services. It operates through the following segments: UnitedHealthcare, OptumHealth, OptumInsight, and OptumRx. The UnitedHealthcare segment utilizes Optum’s capabilities to help coordinate patient care, improve affordability of medical care, analyze cost trends, manage pharmacy benefits, work with care providers more effectively, and create a simpler consumer experience. The OptumHealth segment provides health services business serving the broad health care marketplace, including payers, care providers, employers, government, life sciences companies, and consumers. The OptumInsight segment is health information, technology, services, and consulting company providing software and information products, advisory consulting services, and business process outsourcing to participants in the healthcare industry. The OptumRx segment provides pharmacy benefit management (PBM) services. The company was founded by Richard T. Burke in January 1977 and is headquartered in Minneapolis, MN.

UNH Chart

UNH data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of UNH – February 2018

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $222,717,303,512 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.73 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 137.95% Pass
6. Moderate PEmg Ratio PEmg < 20 25.37 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 4.77 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 0.73 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -2.16 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $9.07
MG Growth Estimate 10.55%
MG Value $268.58
Opinion Fairly Valued
MG Grade D+
MG Value based on 3% Growth $131.56
MG Value based on 0% Growth $77.12
Market Implied Growth Rate 8.43%
Current Price $230.16
% of Intrinsic Value 85.69%

UnitedHealth Group Inc does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the current assets. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $5.33 in 2014 to an estimated $9.07 for 2018. This level of demonstrated earnings growth supports the market’s implied estimate of 8.43% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value within a margin of safety relative to the price.

At the time of valuation, further research into UnitedHealth Group Inc revealed the company was trading above its Graham Number of $109.2. The company pays a dividend of $2.88 per share, for a yield of 1.2% Its PEmg (price over earnings per share – ModernGraham) was 25.37, which was below the industry average of 37.66, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-54.69.

UnitedHealth Group Inc scores quite poorly in the ModernGraham grading system, with an overall grade of D+.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$54.69
Graham Number $109.20
PEmg 25.37
Current Ratio 0.73
PB Ratio 4.77
Current Dividend $2.88
Dividend Yield 1.25%
Number of Consecutive Years of Dividend Growth 8

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2017
Total Current Assets $37,084,000,000
Total Current Liabilities $50,463,000,000
Long-Term Debt $28,835,000,000
Total Assets $139,058,000,000
Intangible Assets $63,045,000,000
Total Liabilities $91,282,000,000
Shares Outstanding (Diluted Average) 991,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $10.75
Dec2017 $10.72
Dec2016 $7.25
Dec2015 $6.01
Dec2014 $5.70
Dec2013 $5.50
Dec2012 $5.28
Dec2011 $4.73
Dec2010 $4.10
Dec2009 $3.24
Dec2008 $2.40
Dec2007 $3.42
Dec2006 $2.97
Dec2005 $2.31
Dec2004 $1.83
Dec2003 $1.34
Dec2002 $1.07
Dec2001 $0.70
Dec2000 $0.55
Dec1999 $0.40
Dec1998 -$0.14

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $9.07
Dec2017 $7.84
Dec2016 $6.24
Dec2015 $5.64
Dec2014 $5.33
Dec2013 $4.95
Dec2012 $4.43
Dec2011 $3.87
Dec2010 $3.36
Dec2009 $2.95
Dec2008 $2.74
Dec2007 $2.73
Dec2006 $2.22
Dec2005 $1.71
Dec2004 $1.31
Dec2003 $0.97
Dec2002 $0.70

Recommended Reading:

Other ModernGraham posts about the company

UnitedHealth Group Inc Valuation – February 2017 $UNH
UnitedHealth Group Inc. Valuation – November 2015 Update $UNH
26 Companies in the Spotlight This Week – 11/22/14
UnitedHealth Group Inc. Annual Valuation – 2014 $UNH
5 Undervalued Companies to Research with a Low Beta – November 2014

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C R Bard Inc Valuation – March 2017 $BCR

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

UnitedHealth Group Inc Valuation – February 2017 $UNH

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Stocks for Using A Benjamin Graham Value Investing Strategy – February 2017.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how UnitedHealth Group Inc (UNH) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): UnitedHealth Group Incorporated is a health and well-being company. The Company operates through four segments: UnitedHealthcare, OptumHealth, OptumInsight and OptumRx. It conducts its operations through two business platforms: health benefits operating under UnitedHealthcare and health services operating under Optum. UnitedHealthcare provides healthcare benefits to an array of customers and markets, and includes UnitedHealthcare Employer & Individual, UnitedHealthcare Medicare & Retirement, UnitedHealthcare Community & State, and UnitedHealthcare Global businesses. Optum is a health services business serving the healthcare marketplace, including payers, care providers, employers, governments, life sciences companies and consumers, through its OptumHealth, OptumInsight and OptumRx businesses. OptumInsight provides services, technology and healthcare solutions to participants in the healthcare industry. OptumRx provides retail network contracting, purchasing and clinical solutions.

UNH Chart

UNH data by YCharts

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Downloadable PDF version of this valuation:

ModernGraham Valuation of UNH – February 2017

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $159,541,804,768 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.69 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 132.96% Pass
6. Moderate PEmg Ratio PEmg < 20 22.33 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 4.18 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 0.69 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -1.68 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

EPSmg $7.41
MG Growth Estimate 7.44%
MG Value $173.14
Opinion Fairly Valued
MG Grade D+
MG Value based on 3% Growth $107.38
MG Value based on 0% Growth $62.95
Market Implied Growth Rate 6.92%
Current Price $165.38
% of Intrinsic Value 95.52%

UnitedHealth Group Inc does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the current assets. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $4.95 in 2013 to an estimated $7.41 for 2017. This level of demonstrated earnings growth supports the market’s implied estimate of 6.92% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value within a margin of safety relative to the price.

At the time of valuation, further research into UnitedHealth Group Inc revealed the company was trading above its Graham Number of $92.37. The company pays a dividend of $2.38 per share, for a yield of 1.4% Its PEmg (price over earnings per share – ModernGraham) was 22.33, which was below the industry average of 32.29, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-52.33.

UnitedHealth Group Inc scores quite poorly in the ModernGraham grading system, with an overall grade of D+.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$52.33
Graham Number $92.37
PEmg 22.33
Current Ratio 0.69
PB Ratio 4.18
Current Dividend $2.38
Dividend Yield 1.44%
Number of Consecutive Years of Dividend Growth 8

[/not-level-free]

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2016
Total Current Assets $33,879,000,000
Total Current Liabilities $49,252,000,000
Long-Term Debt $25,777,000,000
Total Assets $122,810,000,000
Intangible Assets $56,125,000,000
Total Liabilities $84,536,000,000
Shares Outstanding (Diluted Average) 968,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $9.43
Dec2016 $7.25
Dec2015 $6.01
Dec2014 $5.70
Dec2013 $5.50
Dec2012 $5.28
Dec2011 $4.73
Dec2010 $4.10
Dec2009 $3.24
Dec2008 $2.40
Dec2007 $3.42
Dec2006 $2.97
Dec2005 $2.31
Dec2004 $1.83
Dec2003 $1.34
Dec2002 $1.07
Dec2001 $0.70
Dec2000 $0.55
Dec1999 $0.40
Dec1998 -$0.14
Dec1997 $0.28

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $7.41
Dec2016 $6.24
Dec2015 $5.64
Dec2014 $5.33
Dec2013 $4.95
Dec2012 $4.43
Dec2011 $3.87
Dec2010 $3.36
Dec2009 $2.95
Dec2008 $2.74
Dec2007 $2.73
Dec2006 $2.22
Dec2005 $1.71
Dec2004 $1.31
Dec2003 $0.97
Dec2002 $0.70
Dec2001 $0.46

Recommended Reading:

Other ModernGraham posts about the company

UnitedHealth Group Inc. Valuation – November 2015 Update $UNH
26 Companies in the Spotlight This Week – 11/22/14
UnitedHealth Group Inc. Annual Valuation – 2014 $UNH
5 Undervalued Companies to Research with a Low Beta – November 2014
5 Undervalued Companies to Research With a Low Beta – October 2014

Other ModernGraham posts about related companies

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Danaher Corporation Valuation – February 2017 $DHR
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CorVel Corp Valuation – Initial Coverage $CRVL
Charles River Laboratories Intl Inc Valuation – Initial Coverage $CRL
Kindred Healthcare Inc Valuation – Initial Coverage $KND
SurModics Inc Valuation – Initial Coverage $SRDX
Agilent Technologies Inc Valuation – February 2017 $A
Cooper Companies Inc Valuation – Initial Coverage $COO

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

UnitedHealth Group Inc. Valuation – November 2015 Update $UNH

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Most Undervalued Companies for the Defensive Investor – November 2015.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how UnitedHealth Group Inc. (UNH) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): UnitedHealth Group Incorporated is a health and well-being company. The Company’s business platforms include UnitedHealthcare and Optum. UnitedHealthcare provides health care benefits to various customers and markets. Optum is a health services business serving the health care marketplace, including payers, care providers, employers, Governments, life sciences companies and consumers. The Company’s business platforms have four segments: UnitedHealthcare, OptumHealth, OptumInsight and OptumRx. UnitedHealthcare includes UnitedHealthcare Employer & Individual, UnitedHealthcare Medicare & Retirement, UnitedHealthcare Community & State and UnitedHealthcare Global. OptumHealth is a health and wellness business serving the physical, emotional and financial needs of individuals. OptumInsight provides technology, operational and consulting services to participants in the health care industry. OptumRx provides a range of pharmacy benefit management (PBM) services.

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To read the details of this valuation, you must be logged in as a premium member. If you are not a premium member, please consider becoming one.

Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. Here is a free sample valuation pdf, and here is a post detailing what can be found within each individual company’s valuation.

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Downloadable PDF version of this valuation:

ModernGraham Valuation of UNH – November 2015

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $107,393,527,880 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.75 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 98.41% Pass
6. Moderate PEmg Ratio PEmg < 20 19.90 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.32 Fail
Score
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 0.75 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -2.60 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

UNH value Chart November 2015

EPSmg $5.72
MG Growth Estimate 7.19%
MG Value $130.87
Opinion Fairly Valued
MG Value based on 3% Growth $82.93
MG Value based on 0% Growth $48.61
Market Implied Growth Rate 5.70%
Current Price $113.82
% of Intrinsic Value 86.97%

UnitedHealth Group Inc. does not qualify for either the Enterprising Investor or the more conservative Defensive Investor.  The Defensive Investor is concerned with the low current ratio and the high PB ratio.  The Enterprising Investor is concerned by the level of debt relative to the current assets.  As a result, all value investors following the ModernGraham approach based on Benjamin Graham’s methods should explore other opportunities at this time or proceed with a cautious speculative attitude.

As for a valuation, the company appears to be fairly valued after growing its EPSmg (normalized earnings) from $3.87 in 2011 to an estimated $5.72 for 2015.  This level of demonstrated earnings growth supports the market’s implied estimate of 5.7% annual earnings growth over the next 7-10 years.  As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value within a margin of safety relative to the price.

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on UnitedHealth Group Inc. (UNH)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Stage 3: Information for Further Research

UNH Charts November 2015

Net Current Asset Value (NCAV) -$46.77
Graham Number $69.83
PEmg 19.90
Current Ratio 0.75
PB Ratio 3.32
Dividend Yield 1.54%
Number of Consecutive Years of Dividend Growth 6

 

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Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Total Current Assets $29,935,000,000
Total Current Liabilities $39,953,000,000
Long-Term Debt $26,015,000,000
Total Assets $108,272,000,000
Intangible Assets $52,085,000,000
Total Liabilities $75,158,000,000
Shares Outstanding (Diluted Average) 967,000,000

Earnings Per Share History

Next Fiscal Year Estimate $6.24
Dec14 $5.70
Dec13 $5.50
Dec12 $5.28
Dec11 $4.73
Dec10 $4.10
Dec09 $3.24
Dec08 $2.40
Dec07 $3.42
Dec06 $2.97
Dec05 $2.31
Dec04 $1.97
Dec03 $1.48
Dec02 $1.07
Dec01 $0.70
Dec00 $0.55
Dec99 $0.40
Dec98 -$0.14
Dec97 $0.28
Dec96 $0.22
Dec95 $0.20

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $5.72
Dec14 $5.33
Dec13 $4.95
Dec12 $4.43
Dec11 $3.87
Dec10 $3.36
Dec09 $2.95
Dec08 $2.75
Dec07 $2.76
Dec06 $2.27
Dec05 $1.78
Dec04 $1.39
Dec03 $1.02
Dec02 $0.69
Dec01 $0.46
Dec00 $0.31
Dec99 $0.20

Recommended Reading:

Other ModernGraham posts about the company

26 Companies in the Spotlight This Week – 11/22/14
UnitedHealth Group Inc. Annual Valuation – 2014 $UNH
5 Undervalued Companies to Research with a Low Beta – November 2014
5 Undervalued Companies to Research With a Low Beta – October 2014
5 Undervalued Dow Components to Research – October 2014

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Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

UnitedHealth Group Inc. Annual Valuation – 2014 $UNH

UnitedHealth_Group_logoBenjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 5 Most Undervalued Companies for the Defensive Investor – November 2014.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a specific look at how UnitedHealth Group Inc. (UNH) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): UnitedHealth Group Incorporated (UnitedHealthcare) is a diversified health and well-being company. The Company offers a spectrum of products and services through two platforms: UnitedHealthcare, which provides healthcare coverage and benefits services, and Optum, which provides information and technology-enabled health services. It has four segments across its two business platforms: UnitedHealthcare, which includes UnitedHealthcare Employer & Individual, UnitedHealthcare Medicare & Retirement, UnitedHealthcare Community & State and UnitedHealthcare International; OptumHealth; OptumInsight, and OptumRx. UnitedHealthcare provides healthcare benefits to a full spectrum of customers and markets. Optum is a health services business serving the broad healthcare marketplace, including payers, care providers, employers, government, life sciences companies and consumers.

Defensive Investor – must pass at least 6 of the following 7 tests: Score = 5/7

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion - PASS
  2. Sufficiently Strong Financial Condition – current ratio greater than 2 - FAIL
  3. Earnings Stability – positive earnings per share for at least 10 straight years - PASS
  4. Dividend Record – has paid a dividend for at least 10 straight years - PASS
  5. Earnings Growth – earnings per share has increased by at least 1/3 over the last 10 years using 3 year averages at beginning and end of period - PASS
  6. Moderate PEmg ratio – PEmg is less than 20 - PASS
  7. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – FAIL

Enterprising Investor – must pass at least 4 of the following 5 tests or be suitable for a defensive investor: Score = 3/5

  1. Sufficiently Strong Financial Condition, Part 1 – current ratio greater than 1.5 -FAIL
  2. Sufficiently Strong Financial Condition, Part 2 – Debt to Net Current Assets ratio less than 1.1 – FAIL
  3. Earnings Stability – positive earnings per share for at least 5 years – PASS
  4. Dividend Record – currently pays a dividend - PASS
  5. Earnings growth – EPSmg greater than 5 years ago - PASS

Valuation Summary

Key Data:

Recent Price $95.11
MG Value $136.02
MG Opinion Undervalued
Value Based on 3% Growth $76.75
Value Based on 0% Growth $44.99
Market Implied Growth Rate 4.73%
NCAV -$30.41
PEmg 17.97
Current Ratio 0.74
PB Ratio 2.86

Balance Sheet – September 2014

Current Assets $22,963,000,000
Current Liabilities $31,130,000,000
Total Debt $14,592,000,000
Total Assets $85,426,000,000
Intangible Assets $35,936,000,000
Total Liabilities $52,822,000,000
Outstanding Shares 982,000,000

Earnings Per Share

2014 (estimate) $5.60
2013 $5.50
2012 $5.28
2011 $4.73
2010 $4.10
2009 $3.24
2008 $2.40
2007 $3.42
2006 $2.97
2005 $2.48
2004 $1.97

Earnings Per Share – ModernGraham

2014 (estimate) $5.29
2013 $4.95
2012 $4.43
2011 $3.87
2010 $3.36
2009 $2.97

Dividend History

Conclusion:

UnitedHealth Group does not qualify for either the Defensive Investor or the Enterprising Investor.  The Defensive Investor is concerned by the low current ratio, and the high PB ratio.  The Enterprising Investor is concerned by the high level of debt relative to the current assets.  As a result, value investors following the ModernGraham approach based on Benjamin Graham’s methods should explore other opportunities at this time.  From a valuation side of things,  the company appears to be fairly valued after growing its EPSmg (normalized earnings) from $3.36 in 2010 to an estimated $5.29 for 2014.  This demonstrated level of growth outpaces the market’s implied estimate of 4.73% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value above the price.

Be sure to check out previous ModernGraham valuations of UnitedHealth Group (UNH) for greater perspective!

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on UnitedHealth Group (UNH)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Disclaimer:  The author did not hold a position in UnitedHealth Group (UNH) or in any other company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  Logo taken from Wikipedia for the sole purpose of identifying the company; this article is not affiliated with the company in any manner.

UnitedHealth Group Inc. Quarterly Valuation – August 2014 $UNH

UnitedHealth_Group_logoBenjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 5 Undervalued Companies for the Defensive Investor.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a specific look at how UnitedHealth Group Inc. (UNH) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): UnitedHealth Group Incorporated (UnitedHealth Group) diversified health and well-being company. The Company operates in four segments: UnitedHealthcare, which includes UnitedHealthcare Employer & Individual, UnitedHealthcare Medicare & Retirement and UnitedHealthcare Community & State; UnitedHealthcare Community & State; OptumHealth; OptumInsight, and OptumRx. The Company operates these businesses across eight markets: integrated care delivery, care management, consumer engagement and support, distribution of benefits and services, health financial services, operational services and support, health care information technology and pharmacy.
UNH Chart

UNH data by YCharts

Defensive Investor – must pass at least 6 of the following 7 tests: Score = 6/7

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion – PASS
  2. Sufficiently Strong Financial Condition – current ratio greater than 2 – FAIL
  3. Earnings Stability – positive earnings per share for at least 10 straight years – PASS
  4. Dividend Record – has paid a dividend for at least 10 straight years - PASS
  5. Earnings Growth – earnings per share has increased by at least 1/3 over the last 10 years using 3 year averages at beginning and end of period – PASS
  6. Moderate PEmg ratio – PEmg is less than 20 - PASS
  7. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – PASS

Enterprising Investor – must pass at least 4 of the following 5 tests or be suitable for a defensive investor: Score = 3/5

  1. Sufficiently Strong Financial Condition, Part 1 – current ratio greater than 1.5 - FAIL
  2. Sufficiently Strong Financial Condition, Part 2 – Debt to Net Current Assets ratio less than 1.1 – FAIL
  3. Earnings Stability – positive earnings per share for at least 5 years – PASS
  4. Dividend Record – currently pays a dividend - PASS
  5. Earnings growth – EPSmg greater than 5 years ago - PASS

Valuation Summary

Key Data:

Recent Price $81.57
MG Value $132.40
MG Opinion Undervalued
Value Based on 3% Growth $76.03
Value Based on 0% Growth $44.57
Market Implied Growth Rate 3.53%
NCAV -$30.50
PEmg 15.56
Current Ratio 0.74
PB Ratio 2.41

Balance Sheet – 6/30/2014

Current Assets $22,851,000,000
Current Liabilities $30,776,000,000
Total Debt $14,630,000,000
Total Assets $85,466,000,000
Intangible Assets $36,253,000,000
Total Liabilities $52,531,000,000
Outstanding Shares 973,000,000

Earnings Per Share

2014 (estimate) $5.45
2013 $5.50
2012 $5.28
2011 $4.73
2010 $4.10
2009 $3.24
2008 $2.40
2007 $3.42
2006 $2.97
2005 $2.48
2004 $1.97

Earnings Per Share – ModernGraham

2014 (estimate) $5.24
2013 $4.95
2012 $4.43
2011 $3.87
2010 $3.36
2009 $2.97

Dividend History
UNH Dividend Chart

UNH Dividend data by YCharts

Conclusion:

UnitedHealth Group is suitable for the Defensive Investor and therefore is also suitable for the Enterprising Investor.  The Defensive Investor’s only initial concern is the low current ratio, and the Enterprising Investor is willing to overlook concerns about the level of debt relative to the current assets.  As a result, value investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with research into the company and comparing it to other opportunities.  As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $3.36 in 2010 to an estimated $5.24 for 2014.  This level of demonstrated growth outpaces the market’s implied estimate of 3.53% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value above the price.

Be sure to check out the previous ModernGraham valuations of UnitedHealth Group (UNH) for more perspective!

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on UnitedHealth Group Inc. (UNH)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Disclaimer:  The author did not hold a position in UnitedHealth Group Inc. (UNH) or in any other company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  Logo taken from Wikipedia for the sole purpose of identifying the company; this article is not affiliated with the company in any manner.

UnitedHealth Group Inc. (UNH) Quarterly Valuation – May 2014

UnitedHealth_Group_logo (1)Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing 5 Undervalued Companies for the Enterprising Investor.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a specific look at how UnitedHealth Group Inc. (UNH) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): UnitedHealth Group Incorporated (UnitedHealth Group) diversified health and well-being company. The Company operates in four segments: UnitedHealthcare, which includes UnitedHealthcare Employer & Individual, UnitedHealthcare Medicare & Retirement and UnitedHealthcare Community & State; UnitedHealthcare Community & State; OptumHealth; OptumInsight, and OptumRx. The Company operates these businesses across eight markets: integrated care delivery, care management, consumer engagement and support, distribution of benefits and services, health financial services, operational services and support, health care information technology and pharmacy.

UNH Chart

UNH data by YCharts

Defensive Investor – must pass at least 6 of the following 7 tests: Score = 6/7

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion – PASS
  2. Sufficiently Strong Financial Condition – current ratio greater than 2 – FAIL
  3. Earnings Stability – positive earnings per share for at least 10 straight years – PASS
  4. Dividend Record – has paid a dividend for at least 10 straight years – PASS
  5. Earnings Growth – earnings per share has increased by at least 1/3 over the last 10 years using 3 year averages at beginning and end of period – PASS
  6. Moderate PEmg ratio – PEmg is less than 20 – PASS
  7. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – PASS

Enterprising Investor – must pass at least 4 of the following 5 tests or be suitable for a defensive investor: Score = 3/5

  1. Sufficiently Strong Financial Condition, Part 1 – current ratio greater than 1.5 – FAIL
  2. Sufficiently Strong Financial Condition, Part 2 – Debt to Net Current Assets ratio less than 1.1 – FAIL
  3. Earnings Stability – positive earnings per share for at least 5 years – PASS
  4. Dividend Record – currently pays a dividend – PASS
  5. Earnings growth – EPSmg greater than 5 years ago – PASS

Valuation Summary

Key Data:

Recent Price $77.17
MG Value $132.16
MG Opinion Undervalued
Value Based on 3% Growth $75.98
Value Based on 0% Growth $44.54
Market Implied Growth Rate 3.11%
NCAV -$30.19
PEmg 14.73
Current Ratio 0.73
PB Ratio 2.33

Balance Sheet – 3/31/2014

Current Assets $22,364,000,000
Current Liabilities $30,716,000,000
Total Debt $14,524,000,000
Total Assets $84,622,000,000
Intangible Assets $36,017,000,000
Total Liabilities $52,073,000,000
Outstanding Shares 984,000,000

Earnings Per Share

2014 (estimate) $5.44
2013 $5.50
2012 $5.28
2011 $4.73
2010 $4.10
2009 $3.24
2008 $2.40
2007 $3.42
2006 $2.97
2005 $2.48
2004 $1.97
2002 $1.06

Earnings Per Share – ModernGraham

2014 (estimate) $5.24
2013 $4.95
2012 $4.43
2011 $3.87
2010 $3.36
2009 $2.97

Dividend History

UNH Dividend Chart

UNH Dividend data by YCharts

Conclusion:

UnitedHealth Group is suitable for both Defensive Investors and Enterprising Investors.  The company passes all of the Defensive Investor’s requirements except the current ratio, and even though the Enterprising Investor is concerned with the high level of debt relative to current assets, the company qualifies for both investor types because it is suitable for Defensive Investors.  As a result, value investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company and its competitors.  From a valuation side of things, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $3.36 in 2010 to an estimated $5.24 in 2014.  This level of demonstrated growth exceeds the market’s implied estimate of 3.11% earnings growth and leads the ModernGraham to calculate an estimate of intrinsic value that is well above the price.

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on UnitedHealth Group (UNH)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

If you like our valuations, why not check out ModernGraham Stocks & Screens?  It’s a great way to review the valuations while screening for things like low PE ratio, undervalued companies, etc.!

Disclaimer:  The author did not hold a position in UnitedHealth Group (UNH) or in any other company mentioned in the article at the time of publication and had no intention of changing that position within the next 72 hours.

Logo taken from wikipedia; this article is not affiliated with the company in any manner.

UnitedHealth Group (UNH) Quarterly Valuation

UnitedHealth_Group_logo (1)

The healthcare industry is poised to potentially see some major changes in the future, and some may be tempted to speculate about those changes and how they will affect specific companies.  Intelligent Investors know to avoid such speculation by basing their analysis on fundamentals and factual data.  Each investment opportunity must be evaluated in order to determine if the company is trading below its intrinsic value.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a specific look at how UnitedHealth Group fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): UnitedHealth Group Incorporated (UnitedHealth Group) diversified health and well-being company. The Company operates in four segments: UnitedHealthcare, which includes UnitedHealthcare Employer & Individual, UnitedHealthcare Medicare & Retirement and UnitedHealthcare Community & State; UnitedHealthcare Community & State; OptumHealth; OptumInsight, and OptumRx. The Company operates these businesses across eight markets: integrated care delivery, care management, consumer engagement and support, distribution of benefits and services, health financial services, operational services and support, health care information technology and pharmacy.

UNH Chart

UNH data by YCharts

Defensive Investor – must pass at least 6 of the following 7 tests: Score = 6/7

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion – PASS
  2. Sufficiently Strong Financial Condition – current ratio greater than 2 – FAIL
  3. Earnings Stability – positive earnings per share for at least 10 straight years – PASS
  4. Dividend Record – has paid a dividend for at least 10 straight years – PASS
  5. Earnings Growth – earnings per share has increased by at least 1/3 over the last 10 years using 3 year averages at beginning and end of period – PASS
  6. Moderate PEmg ratio – PEmg is less than 20 – PASS
  7. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – PASS

Enterprising Investor – must pass at least 4 of the following 5 tests or be suitable for a defensive investor: Score = 3/5

  1. Sufficiently Strong Financial Condition, Part 1 – current ratio greater than 1.5 – FAIL
  2. Sufficiently Strong Financial Condition, Part 2 – Debt to Net Current Assets ratio less than 1.1 – FAIL
  3. Earnings Stability – positive earnings per share for at least 5 years – PASS
  4. Dividend Record – currently pays a dividend – PASS
  5. Earnings growth – EPSmg greater than 5 years ago – PASS

Valuation Summary

Key Data:

Recent Price $73.52
MG Value $141.46
MG Opinion Undervalued
Value Based on 3% Growth $71.78
Value Based on 0% Growth $42.08
Market Implied Growth Rate 3.18%
NCAV -$29.71
PEmg 14.85
Current Ratio 0.73
PB Ratio 2.26

Balance Sheet – 12/31/2013

Current Assets $20,380,000,000
Current Liabilities $27,881,000,000
Total Debt $14,891,000,000
Total Assets $81,882,000,000
Intangible Assets $35,448,000,000
Total Liabilities $49,733,000,000
Outstanding Shares 988,000,000

Earnings Per Share

2013 $5.50
2012 $5.28
2011 $4.73
2010 $4.10
2009 $3.24
2008 $2.40
2007 $3.42
2006 $2.97
2005 $2.48
2004 $1.97
2003 $1.48
2002 $1.06

Earnings Per Share – ModernGraham 

2013 $4.95
2012 $4.43
2011 $3.87
2010 $3.36
2009 $2.97
2008 $2.77

Dividend History

UNH Dividend Chart

UNH Dividend data by YCharts

Conclusion:

UnitedHealth Group is suitable for the Defensive Investor, and by default is also suitable for the Enterprising Investor.  The company passes all of the requirements of the Defensive Investor except the current ratio requirement.  The Enterprising Investor normally would like to see lower debt levels relative to the current assets, but is willing to overlook that in this case because the company passes so many requirements for the Defensive Investor.  As a result, value investors seeking to follow the ModernGraham approach based on Benjamin Graham’s methods should feel very comfortable proceeding with further research into the company.  Such research should also include a review of other companies that pass these requirements, through a review of ModernGraham Stocks & Screens.  As for a valuation, the company has grown its EPSmg (normalized earnings) from $2.77 in 2008 to $4.95 for 2013.  This is a solid level of growth that outpaces the market’s implied estimate for growth of only 3.18% and leads the ModernGraham valuation model to return an intrinsic value that is greater than the market price.  As a result, the company appears to be undervalued at this time.

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on UnitedHealth Group (UNH)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

If you like our valuations, why not check out ModernGraham Stocks & Screens?  It’s a great way to review the valuations while screening for things like low PE ratio, undervalued companies, etc.!

Disclaimer:  The author did not hold a position in UnitedHealth Group (UNH) or any of the other companies listed in this article at the time of publication and had no intention of changing that position within the next 72 hours.

Logo taken from the Wikipedia; this article is not affiliated with the company in any manner.

ModernGraham Valuation: UnitedHealth Group (UNH)

 

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Company Profile (obtained from Google Finance): UnitedHealth Group Incorporated (UnitedHealth Group) diversified health and well-being company. The Company operates in four segments: UnitedHealthcare, which includes UnitedHealthcare Employer & Individual, UnitedHealthcare Medicare & Retirement and UnitedHealthcare Community & State; UnitedHealthcare Community & State; OptumHealth; OptumInsight, and OptumRx. The Company operates these businesses across eight markets: integrated care delivery, care management, consumer engagement and support, distribution of benefits and services, health financial services, operational services and support, health care information technology and pharmacy.

Defensive and Enterprising Investor Tests (What is the significance of these tests, and what is PEmg ratio?):

Defensive Investor – must pass at least 6 of the following 7 tests: Score = 6/7

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion – PASS
  2. Sufficiently Strong Financial Condition – current ratio greater than 2 – FAIL
  3. Earnings Stability – positive earnings per share for at least 10 straight years – PASS
  4. Dividend Record – has paid a dividend for at least 10 straight years – PASS
  5. Earnings Growth – earnings per share has increased by at least 1/3 over the last 10 years using 3 year averages at beginning and end of period – PASS
  6. Moderate PEmg ratio – PEmg is less than 20 – PASS
  7. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – PASS

Enterprising Investor – must pass at least 4 of the following 5 tests or be suitable for a defensive investor: Score = 4/5

  1. Sufficiently Strong Financial Condition, Part 1 – current ratio greater than 1.5 – FAIL
  2. Sufficiently Strong Financial Condition, Part 2 – Debt to Net Current Assets ratio less than 1.1 – PASS
  3. Earnings Stability – positive earnings per share for at least 5 years – PASS
  4. Dividend Record – currently pays a dividend – PASS
  5. Earnings growth – EPSmg greater than 5 years ago – PASS

Valuation Summary (Calculator)

Key Data:

MG Value $140.16
MG Opinion Undervalued
Value Based on 3% Growth $71.53
Value Based on 0% Growth $41.93
Market Implied Growth Rate 2.99%
NCAV -$28.71
PEmg 14.48
Current Ratio 0.76
PB Ratio 2.23

Balance Sheet – 9/30/2013 

Current Assets $21,194,000,000
Current Liabilities $27,867,000,000
Total Debt $14,888,000,000
Total Assets $81,863,000,000
Intangible Assets $35,770,000,000
Total Liabilities $49,847,000,000
Outstanding Shares 998,000,000

Earnings Per Share – Diluted

2013 (estimate) $5.45
2012 $5.28
2011 $4.73
2010 $4.10
2009 $3.24
2008 $2.40
2007 $3.42
2006 $2.97
2005 $2.48
2004 $1.97
2003 $1.48
2002 $1.06

Earnings Per Share – Modern Graham

2013 (estimate) $4.93
2012 $4.43
2011 $3.87
2010 $3.36
2009 $2.97
2008 $2.77

Conclusion:

UnitedHealth is a very attractive company based on both its financials and its valuation.  The company passes most of the tests of the Defensive Investor and the Enterprising Investor, with its only downside the poor current ratio.  The company has a strong dividend history and stable earnings history.  From a valuation standpoint, the company’s growth in EPSmg (normalized earnings) from $2.77 in 2008 to an estimated $4.93 for 2013 is impressive.  As a result of this strong history of growth, the ModernGraham valuation model looks favorably upon UnitedHealth and the company appears to be undervalued.  Investors should pay close attention to UnitedHealth and continue with further evaluation of the company when considering making an investment, while keeping in mind the 7 Key Tips to Value Investing.

What do you think?  Is UnitedHealth undervalued?  Is the company suitable for both Defensive Investors and Enterprising Investors?  Leave a comment or mention @ModernGraham on Twitter to discuss.

Disclaimer:  The author did not hold a position in UnitedHealth at the time of publication and had no intention of purchasing a position in the next 72 hours.

Photo Credit:  Andrew Magill

Stryker Corp Valuation – February 2019 $SYK

Company Profile (excerpt from Reuters): Stryker Corporation (Stryker), incorporated on February 20, 1946, is a medical technology company. The Company offers a range of medical technologies, including orthopedic, medical and surgical, and neurotechnology and spine products. The Company’s segments include Orthopaedics; MedSurg; Neurotechnology and Spine, and Corporate and Other. The Orthopaedics segment includes reconstructive (hip and knee) and trauma implant systems and other related products. The Company’s MedSurg segment consists of instruments, endoscopy, medical and sustainability products. The Neurotechnology and Spine segment includes neurovascular products, spinal implant systems and other related products.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of SYK – February 2019

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $68,070,990,264 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.02 Pass
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 99.40% Pass
6. Moderate PEmg Ratio PEmg < 20 28.02 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 5.92 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 2.02 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.72 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $6.52
MG Growth Estimate 15.00%
MG Value $250.97
Opinion Undervalued
MG Grade B-
MG Value based on 3% Growth $94.52
MG Value based on 0% Growth $55.41
Market Implied Growth Rate 9.76%
Current Price $182.66
% of Intrinsic Value 72.78%

Stryker Corporation is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the high PEmg and PB ratios. The Enterprising Investor is only concerned with the level of debt relative to the net current assets. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $2.83 in 2015 to an estimated $6.52 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 9.76% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Stryker Corporation revealed the company was trading above its Graham Number of $75.02. The company pays a dividend of $1.93 per share, for a yield of 1.1% Its PEmg (price over earnings per share – ModernGraham) was 28.02, which was below the industry average of 51.18, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-15.17.

Stryker Corporation performs fairly well in the ModernGraham grading system, scoring a B-.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$15.17
Graham Number $75.02
PEmg 28.02
Current Ratio 2.02
PB Ratio 5.92
Current Dividend $1.93
Dividend Yield 1.06%
Number of Consecutive Years of Dividend Growth 9

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Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $9,733,000,000
Total Current Liabilities $4,807,000,000
Long-Term Debt $8,486,000,000
Total Assets $27,229,000,000
Intangible Assets $12,726,000,000
Total Liabilities $15,499,000,000
Shares Outstanding (Diluted Average) 380,200,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $7.98
Dec2018 $9.34
Dec2017 $2.68
Dec2016 $4.35
Dec2015 $3.78
Dec2014 $1.34
Dec2013 $2.63
Dec2012 $3.39
Dec2011 $3.45
Dec2010 $3.19
Dec2009 $2.77
Dec2008 $2.78
Dec2007 $2.44
Dec2006 $1.89
Dec2005 $1.57
Dec2004 $1.08
Dec2003 $1.07
Dec2002 $0.81
Dec2001 $0.67
Dec2000 $0.55
Dec1999 $0.05

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $6.52
Dec2018 $5.29
Dec2017 $3.16
Dec2016 $3.30
Dec2015 $2.83
Dec2014 $2.50
Dec2013 $3.08
Dec2012 $3.24
Dec2011 $3.09
Dec2010 $2.81
Dec2009 $2.51
Dec2008 $2.24
Dec2007 $1.85
Dec2006 $1.46
Dec2005 $1.18
Dec2004 $0.93
Dec2003 $0.78

Recommended Reading:

Other ModernGraham posts about the company

Stryker Corp Valuation – April 2018 $SYK
Stryker Corporation Valuation – August 2016 $SYK
Stryker Corporation Valuation – January 2016 Update $SYK
Stryker Corporation Analysis – October 2015 Update $SYK
Stryker Corporation Analysis – July 2015 Update $SYK

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Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

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