Thanks to the rapidly growing expenses in healthcare and medicines, medical health insurance companies are always in demand as having health insurance could not only save one’s life but also save an individual from financial ruin.
The demand for healthcare remains robust irrespective of the economic cycle. Given the growing demand for healthcare, the medical-health insurance industry is well-positioned for growth. Therefore, it could be wise to add fundamentally strong medical stocks, UnitedHealth Group Incorporated (UNH), The Cigna Group (CI), and Molina Healthcare, Inc. (MOH), to your portfolio.
Before diving deeper into the fundamentals of these stocks, let’s discuss why the medical-health insurance industry is poised for growth.
When it comes to health, individuals are unlikely to cut back on its expenditure. Due to the inelastic demand for medical products and services, the healthcare industry can maintain its profit margins regardless of economic downturns. As the population continues to grow and age, the demand for medical services and health insurance is expected to increase.
This ensures a steady and reliable customer base for medical-health insurance companies. Healthcare costs have been rising steadily for years due to advancing technology, increasing drug prices, and rising chronic diseases. This results in higher insurance premiums for medical-health insurance companies boosting their bottom line.
Due to the resiliency of the healthcare industry during economic downturns, the medical-health insurance companies prove to be a solid investment option. According to Statista, market volume in the Health Care segment is expected to reach $27.67 billion by 2027, growing at a CAGR of 12.9%.
Considering these factors, it could be wise to buy the featured stocks. Let’s take a closer look at their fundamentals.
UnitedHealth Group Incorporated (UNH)
UNH operates as a diversified healthcare company in the United States. It operates through four segments: UnitedHealthcare; Optum Health; Optum Insight; and Optum Rx.
On February 22, 2023, Somatus and UNH announced expanding their long-standing and successful value-based partnership to provide high-touch kidney care services to thousands of new members.
The agreement enables more UNH members with kidney disease access to an outcomes-based medical management program that integrates care and prioritizes health.
In terms of forward Price/Sales, UNH’s 1.24x is 69.7% lower than the 4.09x industry average. Its 1.35x forward EV/Sales is 63.3% lower than the industry average of 3.67x. Likewise, its 15.27x forward EV/EBIT is 8.3% lower than the 16.66x industry average.
UNH’s total revenues increased 14.7% year-over-year to $91.93 billion for the first quarter that ended March 31, 2023. The company’s adjusted net earnings attributable to UNH common shareholders increased 12.7% year-over-year to $5.90 billion. In addition, its adjusted EPS came in at $6.26, representing a 14% increase over the prior-year quarter.
UNH’s EPS and revenue for the quarter ending June 30, 2023, are expected to increase 10.3% and 13% year-over-year to $6.14 and $90.78 billion, respectively. The company has a commendable earnings surprise history, surpassing the consensus EPS estimates in each of the trailing four quarters. Over the past year, the stock has fallen 1.6% to close the last trading session at $484.81.
UNH’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of A, which translates to a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
Within the A-rated Medical - Health Insurance industry, it is ranked #4 out of 10 stocks. The stock has a B grade for Stability, Sentiment, and Quality. Click here to see the additional ratings of UNH for Growth, Value, and Momentum.
The Cigna Group (CI)
CI provides insurance and related products and services in the United States. The company operates through two segments: Evernorth Health Services and Cigna Healthcare.
On April 20, 2023, Express Scripts, the pharmacy benefits management (PBM) business of Evernorth, a subsidiary of CI, announced key efforts to expand access to health care in rural communities through partnerships with independent pharmacies across the U.S.
The IndependentRx Initiative is expected to increase reimbursement opportunities and additional care services to rural independent pharmacies, as well as create an Independent Pharmacy Advisory Committee to expand the role of rural, suburban, and urban pharmacies in the health care system.
In terms of forward non-GAAP P/E, CI’s 10.60x is 45.2% lower than the 19.36x industry average. Its 0.54x forward EV/Sales is 85.2% lower than the industry average of 3.67x. Likewise, its 8.79x forward EV/EBITDA is 33.7% lower than the 13.25x industry average.
CI’s adjusted revenues for the fiscal first quarter ended March 31, 2023, increased 5.4% year-over-year to $46.48 billion. Its operating cash flow rose 148% over the prior-year quarter to $5.03 billion. The company’s net income increased 8% year-over-year to $1.31 billion.
Analysts expect CI’s EPS for the quarter ending September 30, 2023, to increase 15.1% year-over-year to $6.95. Its revenue for the quarter ending June 30, 2023, is expected to increase 3.5% year-over-year to $47.09 billion. The company has an excellent earnings surprise history, surpassing the consensus EPS estimates in each of the trailing four quarters.
Over the past month, the stock has gained 1.8% to close the last trading session at $263.22.
It is no surprise that CI has an overall rating of A, equating to a Strong Buy in our proprietary rating system. It is ranked #6 in the same industry. It has a B grade for Growth, Value, and Quality.
To see the additional POWR Ratings of CI for Momentum, Stability, and Sentiment, click here.
Molina Healthcare, Inc. (MOH)
MOH provides managed healthcare services to low-income families and individuals under the Medicaid and Medicare programs and through the state insurance marketplaces. It operates in four segments, Medicaid, Medicare, Marketplace, and Other.
In terms of forward non-GAAP P/E, MOH’s 14.54x is 24.9% lower than the 19.36x industry average. Its 0.46x forward EV/Sales is 87.6% lower than the industry average of 3.67x. Likewise, its 9.31x forward EV/EBIT is 44.1% lower than the 16.66x industry average.
MOH’s total revenue for the first quarter that ended March 31, 2023, increased 4.9% year-over-year to $8.15 billion. The company’s adjusted net income increased 17% year-over-year to $337 million. Its adjusted EPS came in at $5.81, representing an increase of 18.6% year-over-year.
Street expects MOH’s EPS and revenue for the quarter ending June 30, 2023, to increase 11.5% and 3.2% year-over-year to $5.07 and $8.31 billion, respectively. The company has an impressive earnings surprise history, surpassing the consensus EPS estimates in each of the trailing four quarters. Over the past month, the stock has gained marginally to close the last trading session at $295.46.
MOH’s positive outlook is reflected in its POWR Ratings. The stock has an overall rating of A, which equates to a Strong Buy in our proprietary rating system.
It is ranked #5 in the Medical - Health Insurance industry. It has an A grade for Quality and a B for Value. Click here to see the other ratings of MOH for Growth, Momentum, Stability, and Sentiment.
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UNH shares were trading at $478.82 per share on Thursday morning, down $5.99 (-1.24%). Year-to-date, UNH has declined -9.37%, versus a 8.95% rise in the benchmark S&P 500 index during the same period.
About the Author: Malaika Alphonsus
Malaika's passion for writing and interest in financial markets led her to pursue a career in investment research. With a degree in Economics and Psychology, she intends to assist investors in making informed investment decisions.
3 Medical Stocks to Add to Your Portfolio StockNews.com
