UnitedHealth Group Inc (NYSE:UNH) is an excellent growth story. We believe that the stock will continue to rise in the future on the back of the growth in telemedicine and digital trends in the healthcare sector. A latest Parks Associates survey says that a majority of Americans prefer telemedicine and virtual visits. Over 60% of U.S. broadband prefer remote care services including online support.
Optum is the biggest growth driver for UnitedHealth. The health services business brought in about 36% the company’s revenue in 2016. Optum business segment’s revenue has grown by 20% every year since 2012. OptumCare business revenue increased by 40% in the second quarter of 2017.
OptumCare is a health delivery organization through which UnitedHealth Group Inc (NYSE:UNH) provides affordable health services. It is one of the most tech-oriented health services, in which metrics like data, analytics and web-based solutions are used to optimize value. OptumCare analytics provides doctors a smart analysis and set of tools to dig into data to improve the lives of their patients. Optum has huge growth potential. The service is currently available in just 28 markets. UnitedHealth plans to expand the service to at least 75 markets, in which around 200 million people will be covered. Earlier this year, UnitedHealth acquired Surgical Care Affiliates and expanded into 17 more markets.
Managed healthcare will keep growing in the US, and UnitedHealth has an edge in the industry due to its managed healthcare services.
UnitedHealth Group Inc (NYSE:UNH) revenue cycle management platform Optum360 is also growing, and analysts think that the platform will be one of the major growth drivers for the company. The total number of health facilities that uses Optum360’s computerized documentation technology has doubled to 125 in 2016. This division is expected to differentiate UNH from its key competitors. UnitedHealth’s financial health looks strong. The company’s ROA and ROE ratios are better than those of its competitors. Margins are declining amid the changing industry environment but they improved after UnitedHealth announced to exit Obamacare last year.
The stock is up over 21% since the start of this year. UnitedHealth Group Inc (NYSE:UNH) has consistently crushed consensus estimates for its quarterly results in the last 15 quarters. Analysts’ estimates have been increased for fiscal 2017 and 2018, which shows that the market confidence in UnitedHealth is improving.
UnitedHealth is fairly valued. The stock is currently trading at 17.8X expected earnings for 2018. This is 5% less than the average PE ration of 18.7 of S&P 500 (NYSEARCA:SPY).