Value investors on the lookout for stable stocks in the healthcare and insurance sectors should not miss out on a particular company that has consistently delivered strong performance over the years: UnitedHealth Group (UNH).
Despite its notable performance in the past 10 years and tangible plans that lead to more room for growth, UNH is still remarkably undervalued.
With the expanding reach of the COVID-19 vaccines and the promising prospects offered by Medicaid and Medicare expansion efforts, the future of this health insurance provider definitely looks bright.
In fact, this stock managed to weather the devastating effects of the COVID-19 pandemic and did pretty well in 2020.
Shares of this health insurance titan actually climbed 19%, beating the S&P 500 index.
What’s even more promising is that UNH appears to be doing better in 2021.
In its first-quarter earnings report, UNH recorded a 9% jump in its revenue for the first quarter of 2021 at $70.9 billion compared to the $64.4 billion reported in the same period in 2020.
In terms of its net income for the quarter, UNH raked in $4.9 billion compared to the $3.4 billion it reported last year.
This puts its earnings per share at $5.31, a notable bump from the $3.72 recorded in the same period a year ago and blowing past analyst estimates of $4.38 per share.
With a $388.73 billion market capitalization, UNH is easily one of the biggest companies in its field. In comparison, competitors like Anthem (ANTM) hold a market cap of $97.5 billion, while Humana (HUM) has $56.47 billion.
Leveraging its size and power, this healthcare giant has ventured into diversifying its portfolio to ensure consistent results amid the never-ending changes in the healthcare industry.
Looking at the numbers closely, UNH’s health insurance segment brought in the bulk of the revenue in the first quarter with $55.1 billion, up by 7.9% compared to last year.
Membership count also increased by over 1 million during this period, which could be primarily attributed to the strong growth of its Medicare Advantage program.
The addition of specialty services, like dental and vision insurance, also contributed to the sustained development of this segment.
Meanwhile, UNH’s Optum division saw a 10% increase in its revenue year-over-year to reach $36.4 billion.
Even its OptumHealth segment delivered a particularly strong performance, with its revenue jumping by 31% compared to the same period last year.
UNH’s technology services sector, OptumInsight, also experienced revenue growth to reach $20.8 billion this quarter.
Even UNH’s weakest link, its OptumRx sector or the pharmacy benefits management division, experienced a slight increase in its revenue to hit $21.6 billion year over year.
These numbers show how UNH is split into two major groups. One sector offers traditional insurance plans, while the other, Optum, offers pharmacy and doctor services.
In 2020, its insurance segment comprised 60% of UNH’s overall revenue, while Optum generated the remaining 40%.
This translated to $257 billion in revenue from the insurance plans and $103 billion generated by its Optum services division.
Considering that UNH appears to be performing better than originally projected, its earnings guidance for 2021 was adjusted to reflect the changes.
To date, the company estimates its adjusted earnings to be somewhere between $18.10 and $18.60 for each share.
UNH utilizes a balanced business approach, which covers both traditional services in the health insurance sector and a variety of innovative solutions courtesy of its Optum units.
So far, this strategy has paid off well in the long run. As we see the world go back to normal, it is expected that UNH would enjoy even more tailwinds in its favor.
UNH is a solid stock that deserves a spot in any value investor’s portfolio.
If the efforts to fight the COVID-19 pandemic prove to be successful this year, then UNH expects an even better performance in 2022.
