UnitedHealth Group’s valuation
UnitedHealth Group is a leading managed healthcare firm in the United States. It offers healthcare products and insurance services through its two divisions: UnitedHealthcare and Optum. The company recently acquired Genoa Healthcare to expand its OptumRx business.
On October 3, UnitedHealth Group had a market capitalization of $260.7 billion, and its stock closed at $270.90. The stock traded at its 52-week high on the day. On October 3, UnitedHealth Group was trading at a forward PE (price-to-earnings) ratio of 19x, and its last-12-month PE ratio was 25.1x.
UnitedHealth Group’s forward PE multiple is above the industry average of 16.5x. Generally, a high forward PE is a sign of an overvalued stock, or it might indicate a high growth stock.
We’ll look at a growth-neutral valuation metric, the PEG (price-to-earnings-to-growth) ratio, for UNH’s valuation. It is a key valuation multiple used for the comparison of companies with different growth profiles in different industries. On October 3, UNH had a 12-month forward PEG ratio of ~1.05x. Peers Aetna (AET), Humana (HUM), and Cigna (CI) had forward PEG ratios of 1.5x, 1.0x, and 0.75x, respectively. Their forward PEs were 16.7x, 19.9x, and 14.2x, respectively.
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