Here's Why We Think UnitedHealth Group (NYSE:UNH) Is Well Worth Watching

For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it currently lacks a track record of revenue and profit. But the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses. Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like UnitedHealth Group (NYSE:UNH). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide UnitedHealth Group with the means to add long-term value to shareholders.

View our latest analysis for UnitedHealth Group

How Quickly Is UnitedHealth Group Increasing Earnings Per Share?

If you believe that markets are even vaguely efficient, then over the long term you'd expect a company's share price to follow its earnings per share (EPS) outcomes. That means EPS growth is considered a real positive by most successful long-term investors. UnitedHealth Group managed to grow EPS by 14% per year, over three years. That growth rate is fairly good, assuming the company can keep it up.

One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. It's noted that UnitedHealth Group's revenue from operations was lower than its revenue in the last twelve months, so that could distort our analysis of its margins. EBIT margins for UnitedHealth Group remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 13% to US$315b. 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.

The trick, as an investor, is to find companies that are going to perform well in the future, not just in the past. While crystal balls don't exist, you can check our visualization of consensus analyst forecasts for UnitedHealth Group's future EPS 100% free.

Are UnitedHealth Group Insiders Aligned With All Shareholders?

Since UnitedHealth Group has a market capitalisation of US$503b, we wouldn't expect insiders to hold a large percentage of shares. But we are reassured by the fact they have invested in the company. Notably, they have an enviable stake in the company, worth US$1.7b. While that is a lot of skin in the game, we note this holding only totals to 0.3% of the business, which is a result of the company being so large. This still shows shareholders there is a degree of alignment between management and themselves.

Is UnitedHealth Group Worth Keeping An Eye On?

One positive for UnitedHealth Group is that it is growing EPS. That's nice to see. To add an extra spark to the fire, significant insider ownership in the company is another highlight. The combination definitely favoured by investors so consider keeping the company on a watchlist. You still need to take note of risks, for example - UnitedHealth Group has 1 warning sign we think you should be aware of.

There's always the possibility of doing well buying stocks that are not growing earnings and do not have insiders buying shares. But for those who consider these important metrics, we encourage you to check out companies that do have those features. You can access a free list of them here.

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

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.