UnitedHealth Group Long Term Investment

Tools online also have made it easier for analysts to get accurate and analyzed information, thereby making it easier for the analysts to make a financial decision based on it. Therefore, it can be argued that investment is much easier in this day and age. However, wrong analysis and predictions can lead to large losses to the investor. It is a fact that the financial statements provide only part of the picture. There are other factors that are to be considered, the grand majority of which are external factors, including technology, infrastructure and the competitors. Such a stock would be a company with a straight-forward business model, thus making it easier to decipher the opportunities available. UnitedHealth Group is such a company, as it is fairly easy to understand what the company does.

Furthermore, there is a large amount of information in the public domain on how the insurance industry works, making it easier to predict trends in the stock and its profitability. Another way to ensure that the stock selected is the right stock is to invest in a company that can be considered to be the best in whichever sector it is based. A company with a strong brand presence or is in the process of growing its brand is considered a wise investment. However, past records on performance would be a good indicator as to whether the past administration was managing the company as it should have or not. Bad performance is a good indicator as to whether the company deserves to be invested in or is a bad choice.

United Health has had a great track record, and thus is an ideal stock to invest in. Another factor to consider is the dividend paid by the company. One of the main needs of the client was to have a stock that pays a dividend regularly. A positive liquidity ratio is important as well, however, it is not an indicator of long term stability. Liquidity Ratio As at March 2018, UnitedHealth had a relatively low liquidity ratio of 0. Statistics show that this means the company may have difficulty in meeting its current fiduciary responsibilities in the short term (Brunnermeier and Pedersen 2214). The company has had higher current ratios in the past 10 years, with the highest point being 2. 87, and the lowest being 0. 23, which is relatively lower than that of the competition (Appendix I).

CVS Health, for example, has a Debt-to-Asset ratio of 0. 48, while Anthem Inc. has a ratio of 0. This figure is bound to rise in the years to come, considering the recent acquisition of Banmedica, increasing the company’s net worth as well as the overall profitability. If the company pays out a dividend of $2 annually, then it shall take the investor 15 years to get back his initial investment (Cooper 887). The calculation above is slightly flawed, however, as the earnings of any company do not remain constant annually. In the event that the company is able to increase its overall profits, then the P/E ratio shall decrease and the stock shall become more valuable. However, if the company starts losing its profitability, then the P/E ratio increases and therefore it would take longer for the investor to get his investment back.

As of March 2018, the P/E ratio of UnitedHealth was at 21. 16, which is near the company’s all-time high (Appendix III). This figure is way above the competition, with CVS Health having a much lower ratio of 0. 36 and Anthem Inc. having a similarly low 0. This ratio is, however, limited, as it cannot be used to compare companies in different industries. All the ratios have shown an upward trend. In particular, the PS ratio is increasing at a fast rate, thereby making the stock a prime choice for any investor in need of a stock to invest in for the long term. Stock Analysis Since being listed, UnitedHealth has been a good performer in the stock market. In the past few weeks, the stock has been able to rise up to 28.

82%, a measure that has surpassed the Zacks Health Maintenance Organization industry gain index, which had estimated that the stocks industry-wide would rise by an average of 21%. The use of ratios to determine the strength of the stock has provided a good outlook on how to judge the stock accurately. The company’s PE is valued much lower than the rest of the market, at 17. 66 (Appendix III). This is much lower than other companies, both within the industry and in other industries as well. This is despite the fact that the stock has a very high profit margin, as well as an equally high PS ratio. The company has intimated that it is planning to invest more money into its own businesses, as well as acquire other companies within the United States and outside the United States as well.

The investment in the Chilean firm is a good sign, as the company is strengthening its position in the market and therefore remaining as a market leader for years to come. The stock is clearly a good investment and shall provide favorable returns for long term investors. Works Cited Ali, A, LS Hwang and MA Trombley. "Residual-income-based valuation predicts future stock returns: Evidence on mispricing vs. Guterman. Competition Among Medicare’s Private Health Plans: Does It Really Exist? The Commonwealth Fund, 2015. Brunnermeier, MK and LH, Pedersen. "Market liquidity and funding liquidity. " Review of Financial Studies (2009): 2201-2238. Debt to Equity Comparison Data between UnitedHealth and Competitors Appendix III. PE ratio Comparison Data between UnitedHealth and Competitors Appendix IV. Current Ratio Comparison Data between UnitedHealth and Competitors.