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UnitedHealth Fundamental Analysis October 2023.

UnitedHealth Fundamental Analysis.


Unitedhealth Fundamental Analysis. UnitedHealth Group, Inc. is a leading provider of an extensive range of healthcare products and services. The Company offers various healthcare plans such as health maintenance organizations (HMOs), point of service plans (POS), preferred provider organizations (PPOs), and managed fee-for-service programs.

One of the distinctive strengths of UnitedHealth is its large and diverse membership base. The company has strategically expanded its presence in the prescription drug sector through its OptumRx division, which became more robust with the acquisition of Catamaran. In addition, UnitedHealth has made several significant acquisitions of competing healthcare providers. The company transformed itself from a pure health insurer into a comprehensive healthcare provider.


UnitedHealth operates through two primary business platforms: UnitedHealthcare and Optum. The company’s strategic approach involves integrating medical care services from its Optum unit with insurance products under the UnitedHealthcare brand, enabling cross-selling of products and services. This strategy fuels its objective of expanding both business platforms to serve a broader client base, thereby enhancing growth prospects. Within these platforms, UnitedHealth Group operates four reportable segments, including UnitedHealthcare, OptumHealth, OptumInsight, and OptumRx.


The UnitedHealthcare segment, which accounted for 77% of the company’s revenues in 2022, encompasses UnitedHealthcare Employer & Individual, UnitedHealthcare Medicare & Retirement, UnitedHealthcare Community & State, and UnitedHealthcare Global. This segment is responsible for offering healthcare benefits on a global scale, catering to both individuals and employers, with a significant presence among Medicare and Medicaid beneficiaries.

The Optum segment, contributing to 23% of the company’s revenue, operates as a technology-enabled health services business, serving various facets of the healthcare ecosystem. It provides support, information, resources, and products to consumers in need of healthcare services. It also caters to healthcare providers such as pharmacies, hospitals, physicians, practices, and other healthcare facilities. The Optum platform is further divided into three segments: OptumHealth, OptumInsight, and OptumRx.

UnitedHealth Group’s diversified business approach, strong membership base, and strategic integration of healthcare services and insurance products position it as a major player in the healthcare industry with promising growth potential.

UnitedHealth Fundamental Analysis.






According to our UnitedHealth fundamental analysis, there are several reasons to buy the stock.

Revenue Growth.

Sustained Revenue Growth: Over the past several years, the company has consistently experienced a positive trajectory in its revenues. From 2015 to 2022, it achieved an impressive compound annual growth rate (CAGR) of 10.9%. In the first half of 2023, the company reported revenues of $184.8 billion, marking a substantial 15.2% year-over-year increase. Both the Optum and UnitedHealthcare segments contributed to this double-digit growth. Projections for the year indicate anticipated total revenues ranging between $357 billion and $360 billion, with the midpoint suggesting a noteworthy 10.6% growth compared to the 2022 reported figure. This promising outlook relyes on the company’s robust market position and its attractive core business. Furthermore, the strategic expansion into the health services sector and international markets provides valuable diversification benefits, shielding the company from the constraints of U.S. regulations. As a result, we foresee a substantial 12.3% year-over-year growth in the top line for 2023.


Rapidly Expanding Health Services Division. UnitedHealth’s health service unit, known as Optum, is emerging as an increasingly valuable asset and a pivotal element of the company’s diversification strategy. Optum’s growth drivers encompass various sectors, including pharmacy care services, care delivery, technology, government services, and international operations. Notably, this segment’s contribution to operating earnings swelled from 25% in 2014 to an impressive 49.4% in 2022. Revenues for Optum surged by 17% year over year in 2022, and this trend continued with a 25% year-over-year increase in the first half of 2023. Key factors driving Optum’s growth include strategic acquisitions within this segment, utilization of advanced technology, market-leading health analytics, modernized care delivery methods, and data-driven approaches to population health management. Each sub-segment within Optum is poised to deliver strong performances.


Recovery in Commercial Business: The company’s Commercial business, representing approximately 50-55% of its total medical membership, faced a decline in memberships due to the economic impact of the COVID-19 pandemic. However, the business made a remarkable turnaround in 2021, with the positive trend continuing into 2022. As of June 30, 2023, memberships in this segment grew by 2.6% year over year, indicating a promising uptrend. This resurgence in the Commercial business is a favorable development for the health insurer.


Robust Cash Flows: UnitedHealth exhibits strong financial flexibility with a consistent track record of generating substantial cash from its operations over the years. Its times interest earned ratio, which stood at 10.99 at the end of the second quarter, indicates a healthy capacity to cover its interest obligations, surpassing the industry benchmark of 9.96. The company’s solid balance sheet strength positions it to enhance shareholder value. Moreover, its long-term earnings growth potential provides ample room for continued dividend growth. Additionally, the company has been actively engaged in share buyback initiatives. Notably, the company’s free cash flows (FCF) after dividends in the trailing 12-month period surged by an impressive 82.7% year over year to reach $31.8 billion. For 2023, UnitedHealth expects operating cash flow to range between $27 billion and $28 billion, a notable increase from the $26.2 billion recorded in 2022.


Expanding Government Business: UnitedHealth’s government business, encompassing Medicaid and Medicare Advantage, is poised for significant growth. The company demonstrated substantial growth in its Medicare Advantage footprint during the 2021 Medicare enrollment season, marking the largest expansion in five years. This momentum continued into 2022, reinforcing the company’s solid growth in the Medicare segment. Anticipating robust individual Medicare Advantage growth combined with group Medicare gains, UnitedHealth foresees another year of market-leading growth in 2023. The company’s MA plans aim to reach 95% of Medicare consumers across the United States in 2023. Management anticipates a customer growth of over 900,000 and 700,000 in its Medicare Advantage business for 2023 and 2024, respectively. Additionally, the company expects continued growth in Medicaid due to the anticipated resumption of eligibility redeterminations by states in early second quarter of 2023.


Steady Adjusted Earnings Outlook: The company’s strong adjusted earnings outlook is expected to instill confidence in investors. For 2023, the metric is projected to range between $24.70 and $25.00 per share, with the midpoint suggesting a substantial 12% growth from the 2022 figure. We also anticipate a robust 11.4% year-over-year earnings growth this year. UnitedHealth is committed to achieving its long-term goal of 13-16% earnings-per-share growth. Year to date, the company’s shares have outperformed the industry, further reinforcing its financial strength and growth prospects.

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