Is UnitedHealth Group a Bargain Here?

With shares of UnitedHealth Group Incorporated (NYSE:UNH) trading at around $51.40, is UNH an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

C = Catalyst for the Stock’s Movement

UnitedHealthUnitedHealth Group has been a consistent winner for many years. This is a company that shows consistent EPS and revenue growth and pays a decent dividend. Currently, UnitedHealth yields 1.60 percent. That’s not substantial, but when you’re invested in one of the safest stocks in existence, it’s not such a bad deal.

Looking ahead at 2013, UnitedHealth Group expects EPS of $5.25 to $5.50 EPS, and revenue between $123 billion and $124 billion. UnitedHealth Group has a habit of not overpromising, which is a good sign. The valuation at the moment is excellent. UnitedHealth Group has a Trailing P/E of 9.80, and a Forward P/E of 9.26. Margins are decent, and cash flow is solid. ROE is 19.07 percent.

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There isn’t much news for UnitedHealth Group at the moment, but the International Consumer Electronics Show is coming up, and UnitedHealth Group hopes to make a splash. In one of the most unexpected partnerships, UnitedHealth Group has a deal with Konami Corp. (NYSE:KNM) for DanceDance Revolution Classroom Edition, which will be displayed. The goal here is to reduce childhood obesity. However, this is only a small part of UnitedHealth Group’s new focus of using technology to show people how they can improve their well-being. At the moment, this might not seem like much of a catalyst for the stock, but it shows how UnitedHealth Group is constantly looking to expand its exposure. In the near future, the company will use smartphones, video games, and TV programming to accomplish this goal.

Let’s take a look at some important numbers for UnitedHealth Group.

E = Equity to Debt Ratio Is Strong

The debt-to-equity ratio for UnitedHealth Group is strong. The balance sheet is negative, but in fine condition.   

Debt-To-Equity

Cash

Long-Term Debt

UNH

0.43

$8.92 Billion

$11.15 Billion

AET

0.43

$638.20 Million

$4.69 Billion

WLP

0.60

$22.83 Billion

$13.40 Billion

 

T = Technicals on the Stock Chart Are Mixed

When we look at the past three years, we see a large gain, especially for a health care company. UnitedHealth Group has outperformed Aetna Inc. (NYSE:AET) and WellPoint Inc. (NYSE:WLP) over that timeframe. However, momentum has slowed.

1 Month

Year-To-Date

1 Year

3 Year

UNH

-4.55%

-5.20%

-1.14%

63.61%

AET

-0.74%

-4.17%

2.36%

39.75%

WLP

3.95%

-1.41%

-13.47%

-2.86%

 

At $51.40, UnitedHealth Group is currently trading below all its averages.    

50-Day SMA

53.97

100-Day SMA

54.59

200-Day SMA

55.38

 

E = Earnings Have Been Steady

If you’re looking to invest in a company that offers steady revenue and earnings growth, then this should be one of the first places you look.

2007

2008

2009

2010

2011

Revenue ($)in billions

75.43

81.19

87.14

94.16

101.86

Diluted EPS ($)

3.42

2.40

3.24

4.10

4.73

 

When we look at last quarter’s results on a YoY basis, we see an increase in revenue and earnings.

9/2011

12/2012

3/2012

6/2012

9/2012

Revenue ($)in billions

25.28

25.92

27.28

27.26

27.30

Diluted EPS ($)

1.17

1.18

1.31

1.27

1.50

T = Trends Support the Industry

UnitedHealth Group might be creating its own trend by using technology to increase exposure. This is a company that already has 650,000 physician contracts and 5,000 hospital contracts, which is in addition to servicing more than 38 million people.

Conclusion

UnitedHealth Group has everything going for it at the moment. This is a company with steady growth, solid cash flow, good debt management, innovation, and good value.

UnitedHealth Group is an OUTPERFORM.

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