UNH Stock Forecast: A Defensive Company For Uncertain Times

Highlights

  • United Health benefited by the pandemic as most people continue to pay for insurance and new clients have been added
  • United Health is a huge company, with a great balance sheet, but in a market with low growth rates
  • In a scenario where central banks raise interest rates due to inflation, United Health shares will not be as affected as technology companies
  • United Health stock forecasts are good, as the company pays steady quarterly dividends and is trading at a fair valuation.

Overview of the Market

The worldwide health insurance market has always been resilient and tends to remain so for quite some time. This is because, in crises, such as Covid, people do not stop paying for the health plan, and when the economy is good, people continue to pay for the plan and more people sign up. However, it is not a market that has large growth rates like e-commerce or retail. For these reasons, the shares of companies in this sector are considered more defensive and optimal for moments of uncertainty, that is, for UNH stock we have a very positive forecast.

The market had an average year-on-year growth of 6.6% from 2017 to 2019, and for the next years, it is projected to grow in an annual CAGR of 5.5% from 2021 to 2028 reaching a total market size of USD 3,038.6 billion in 2028.

Source: Author

This growth is explained by different reasons. Most importantly, because the world population is getting older, and older people use more health care services, therefore insurance gets more expensive. In 2019, 9% of the population was older than 65, and it is estimated that by 2050 16% of the population will be over 65. This increasing number will contribute to the future growth of the company.

Source: Author

Competition

Most of United Health’s revenue comes from the US, which is a very competitive market. The US market has 10 big health insurance companies, but the top 4 companies have more than 40% of the market share. United Health has approximately 14.4% and used to have around 16%.

Source: Statista

When comparing the efficiency between United Health and its competitors, we can see that UNH is much more efficient and profitable in terms of margins than its competitors. We can observe a higher Net profit margin for United Health as well as a higher Dividend Yield. When comparing the net profit margin of the top 4 companies of market share, we can see a big advantage of UNH. Also, United Health has a much smaller debt/equity ratio than its competitors. And, United Health has paid a steady dividend in the last decade. The dividend yield for the stock has low volatility and paid between 1.2% and 1.8% since 2012.

1 2 3 4
View single page >> |

Here at I Know First, our stock market AI has modeled and predicted assets price movement worldwide for short-term and long-term time horizons, ranging from 3 days to a year. Since 2011, we ...

more
How did you like this article? Let us know so we can better customize your reading experience.

Comments

Leave a comment to automatically be entered into our contest to win a free Echo Show.