Here's Why I Think UnitedHealth Group (NYSE:UNH) Might Deserve Your Attention Today

By
Simply Wall St
Published
February 18, 2022
NYSE:UNH
Source: Shutterstock

Some have more dollars than sense, they say, so even companies that have no revenue, no profit, and a record of falling short, can easily find investors. And in their study titled Who Falls Prey to the Wolf of Wall Street?' Leuz et. al. found that it is 'quite common' for investors to lose money by buying into 'pump and dump' schemes.

In contrast to all that, I prefer to spend time on companies like UnitedHealth Group (NYSE:UNH), which has not only revenues, but also profits. Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. Conversely, a loss-making company is yet to prove itself with profit, and eventually the sweet milk of external capital may run sour.

See our latest analysis for UnitedHealth Group

How Fast Is UnitedHealth Group Growing?

If a company can keep growing earnings per share (EPS) long enough, its share price will eventually follow. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. We can see that in the last three years UnitedHealth Group grew its EPS by 14% per year. That's a good rate of growth, if it can be sustained.

Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. I note that UnitedHealth Group's revenue from operations was lower than its revenue in the last twelve months, so that could distort my analysis of its margins. While we note UnitedHealth Group's EBIT margins were flat over the last year, revenue grew by a solid 12% to US$288b. That's a real positive.

You can take a look at the company's revenue and earnings growth trend, in the chart below. To see the actual numbers, click on the chart.

earnings-and-revenue-history
NYSE:UNH Earnings and Revenue History February 18th 2022

Fortunately, we've got access to analyst forecasts of UnitedHealth Group's future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.

Are UnitedHealth Group Insiders Aligned With All Shareholders?

We would not expect to see insiders owning a large percentage of a US$443b company like UnitedHealth Group. But we do take comfort from the fact that they are investors in the company. Notably, they have an enormous stake in the company, worth US$2.2b. I would find that kind of skin in the game quite encouraging, if I owned shares, since it would ensure that the leaders of the company would also experience my success, or failure, with the stock.

Should You Add UnitedHealth Group To Your Watchlist?

One important encouraging feature of UnitedHealth Group is that it is growing profits. Just as polish makes silverware pop, the high level of insider ownership enhances my enthusiasm for this growth. The combination sparks joy for me, so I'd consider keeping the company on a watchlist. We should say that we've discovered 1 warning sign for UnitedHealth Group that you should be aware of before investing here.

You can invest in any company you want. But if you prefer to focus on stocks that have demonstrated insider buying, here is a list of companies with insider buying in the last three months.

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

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