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Here's How Much a $1000 Investment in UnitedHealth Group Made 10 Years Ago Would Be Worth Today

Zacks Equity Research
·4-min read

How much a stock's price changes over time is a significant driver for most investors. Not only can price performance impact your portfolio, but it can help you compare investment results across sectors and industries as well.

Another thing that can drive investing is the fear of missing out, or FOMO. This particularly applies to tech giants and popular consumer-facing stocks.

What if you'd invested in UnitedHealth Group (UNH) ten years ago? It may not have been easy to hold on to UNH for all that time, but if you did, how much would your investment be worth today?

UnitedHealth Group's Business In-Depth

With that in mind, let's take a look at UnitedHealth Group's main business drivers.

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UnitedHealth Group, Inc. provides a wide range of health care products and services, such as health maintenance organizations (HMOs), point of service plans (POS), preferred provider organizations (PPOs), and managed fee-for-service programs.

UnitedHealth has the largest and most diverse membership base within the managed-care organization market, which gives it significant competitive advantages. It also has built its prescription drug business through OptumRx division, with the acquisition of Catamaran in 2015.

The company has acquired a number of competing healthcare providers. These acquisitions have transformed it from a pure health insurer to a comprehensive healthcare provider.

UnitedHealth reports through two segments: UnitedHealthcare and Optum. Its strategy is to meld the provision of medical care from its Optum unit with UnitedHealthcare brand insurance products, which help in cross selling of products and services.

UnitedHealthcare (contributed approximately 63% of revenues in 2020) is divided into UnitedHealthcare Employer & Individual; UnitedHealthcare Medicare & Retirement; UnitedHealthcare Community & State and UnitedHealthcare Global.

Optum (47%) is a technology-enabled health services business serving the broad health care marketplace, including those who need care: the consumers who need the right support, information, resources and products; those who provide care: pharmacies, hospitals, physicians, practices and other health care facilities.

In the fourth quarter of 2020, the company entered into agreements to acquire multiple companies, which are expected to close in the first half of 2021. Additionally, in January 2021, it entered into agreements to purchase multiple companies in the health care sector, most notably, Change Healthcare. This acquisition is likely to close in the second half of 2021. The total capital required for these acquisitions is nearly $13 billion.

 

Bottom Line

Putting together a successful investment portfolio takes a combination of research, patience, and a little bit of risk. For UnitedHealth Group, if you bought shares a decade ago, you're likely feeling really good about your investment today.

A $1000 investment made in March 2011 would be worth $8,461.19, or a gain of 746.12%, as of March 25, 2021, according to our calculations. This return excludes dividends but includes price appreciation.

Compare this to the S&P 500's rally of 196.96% and gold's return of 16.59% over the same time frame.

Looking ahead, analysts are expecting more upside for UNH.

Shares of UnitedHealth have outperformed its industry in a year. The company’s top line is bolstered by new deals, renewed agreements and expansion of service offerings. Its numerous acquisitions bode well for its inorganic growth profile. The company’s solid health services segment provides significant diversification benefits. It remains well poised to gain from its government business, comprising both Medicaid and Medicare Advantage. A sturdy balance sheet and consistent cash flow generation is another positive, which has resulted in a solid capital position. This has empowered the company to engage in prudent shareholder-friendly moves through share buybacks and dividend payments. A strong 2021 guidance instills investor confidence. However, the company is witnessing a slowdown in international and commercial business.

The stock is up 11.56% over the past four weeks, and no earnings estimate has gone lower in the past two months, compared to 2 higher, for fiscal 2021. The consensus estimate has moved up as well.


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