UnitedHealth Group (NYSE: UNH) and Humana (NYSE:HUM) are both large-cap medical companies, but which is the better stock? We will contrast the two companies based on the strength of their valuation, risk, earnings, institutional ownership, profitability, dividends and analyst recommendations.

Earnings and Valuation

This table compares UnitedHealth Group and Humana’s revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
UnitedHealth Group $192.60 billion 0.98 $15.57 billion $8.54 22.76
Humana $53.87 billion 0.68 $2.66 billion $12.25 20.65

UnitedHealth Group has higher revenue and earnings than Humana. Humana is trading at a lower price-to-earnings ratio than UnitedHealth Group, indicating that it is currently the more affordable of the two stocks.

Risk and Volatility

UnitedHealth Group has a beta of 0.64, suggesting that its share price is 36% less volatile than the S&P 500. Comparatively, Humana has a beta of 0.91, suggesting that its share price is 9% less volatile than the S&P 500.

Profitability

This table compares UnitedHealth Group and Humana’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
UnitedHealth Group 4.32% 21.52% 6.81%
Humana 3.37% 15.85% 5.76%

Analyst Recommendations

This is a breakdown of recent ratings and target prices for UnitedHealth Group and Humana, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
UnitedHealth Group 0 0 21 0 3.00
Humana 0 7 12 0 2.63

UnitedHealth Group currently has a consensus target price of $203.20, indicating a potential upside of 4.55%. Humana has a consensus target price of $243.44, indicating a potential downside of 3.78%. Given UnitedHealth Group’s stronger consensus rating and higher possible upside, equities research analysts clearly believe UnitedHealth Group is more favorable than Humana.

Dividends

UnitedHealth Group pays an annual dividend of $3.00 per share and has a dividend yield of 1.5%. Humana pays an annual dividend of $1.60 per share and has a dividend yield of 0.6%. UnitedHealth Group pays out 35.1% of its earnings in the form of a dividend. Humana pays out 13.1% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. UnitedHealth Group has increased its dividend for 7 consecutive years and Humana has increased its dividend for 6 consecutive years. UnitedHealth Group is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Institutional & Insider Ownership

86.2% of UnitedHealth Group shares are held by institutional investors. Comparatively, 99.1% of Humana shares are held by institutional investors. 0.9% of UnitedHealth Group shares are held by insiders. Comparatively, 0.8% of Humana shares are held by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company will outperform the market over the long term.

Summary

UnitedHealth Group beats Humana on 12 of the 17 factors compared between the two stocks.

About UnitedHealth Group

UnitedHealth Group Incorporated is a health and well-being company. The Company operates through four segments: UnitedHealthcare, OptumHealth, OptumInsight and OptumRx. It conducts its operations through two business platforms: health benefits operating under UnitedHealthcare and health services operating under Optum. UnitedHealthcare provides healthcare benefits to an array of customers and markets, and includes UnitedHealthcare Employer & Individual, UnitedHealthcare Medicare & Retirement, UnitedHealthcare Community & State, and UnitedHealthcare Global businesses. Optum is a health services business serving the healthcare marketplace, including payers, care providers, employers, governments, life sciences companies and consumers, through its OptumHealth, OptumInsight and OptumRx businesses. OptumInsight provides services, technology and healthcare solutions to participants in the healthcare industry. OptumRx provides retail network contracting, purchasing and clinical solutions.

About Humana

Humana Inc. is a health and well-being company. The Company’s segments include Retail, Group and Specialty, Healthcare Services and Individual Commercial. The Retail segment consists of Medicare benefits, as well as individual commercial fully insured medical and specialty health insurance benefits, including dental, vision, and other supplemental health and financial protection products. The Group and Specialty segment consists of employer group commercial fully insured medical and specialty health insurance benefits, including dental, vision, and other supplemental health. The Healthcare Services segment includes services offered to its health plan members, as well as to third parties, including pharmacy solutions, provider services, home-based services and clinical programs, as well as services and capabilities to manage population health. The Individual Commercial segment includes Individual Commercial products marketed under the HumanaOne brand.

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