Should You Buy UnitedHealth Stock Before Earnings?

by Rob Otman
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UnitedHealth (NYSE: UNH) is a $180 billion company today. Investors that bought shares one year ago are sitting on a 35.7% total return. That's above the S&P 500's return of 15.92%.

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UnitedHealth stock is beating the market, and it reports earnings next week. But does that make it a good buy today? To answer this question, we've turned to the Investment U Stock Grader. Our Research Team built this system to diagnose the financial health of a company.

Our system looks at six key metrics...

Earnings-per-Share (EPS) Growth: UnitedHealth reported a recent EPS growth rate of 34.91%. That's below the health care providers and services industry average of 65.17%. That's not a good sign. We like to see companies that have higher earnings growth.

Price-to-Earnings (P/E): The average price-to-earnings ratio of the health care providers and services industry is 68.49. And UnitedHealth's ratio comes in at 24.08. It's trading at a better value than many of its competitors.

Debt-to-Equity The debt-to-equity ratio for UnitedHealth stock is 74.24%. That's above the health care providers and services industry average of 72.38%. That's not a good sign. UnitedHealth's debt levels should be lower.

Free Cash Flow per Share Growth UnitedHealth's FCF has been higher than that of its competitors over the last year. That's good for investors. In general, if a company is growing its FCF, it will be able to pay down debt, buy back stock, pay out more in dividends and/or invest money back into the business to help boost growth. It's one of our most important fundamental factors.

Profit Margins The profit margin of UnitedHealth comes in at 4.46% today. And generally, the higher, the better. We also like to see this margin above that of its competitors. UnitedHealth's profit margin is below the health care providers and services average of 4.7%. So that's a negative indicator for investors.

Return on Equity Return on equity tells us how much profit a company produces with the money shareholders invest. The ROE for UnitedHealth is 20.24%, and that's above its industry average ROE of 14.94%.

UnitedHealth stock passes three of our six key metrics today. That's why our Investment U Stock Grader rates it as a Hold.

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Please note that our fundamental factor checklist is just the first step in performing your own due diligence. There are many other factors you should consider before investing. That's why The Oxford Club offers more than a dozen newsletters and trading advisories all aimed at helping investors grow and maintain their wealth.

If you're interested in finding Strong Buy stocks yourself, check out Fundamental Analysis Pro. It's a free five-part mini-course that will teach you how to grade stocks like a Wall Street veteran. Click here to learn more.

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