UnitedHealth Group (UNH 0.30%) is one of the largest healthcare companies in the world. Its market cap sits at around $470 billion. And this is a stock that has risen tremendously in value. In the past 10 years, it has outperformed the markets, achieving gains of over 600% while the S&P 500 has increased by around 180%.
Can UnitedHealth continue on its impressive trajectory and become a trillion-dollar stock by 2030 -- or perhaps even earlier?
The company still has a lot of room to grow
While UnitedHealth Group stock has generated some incredible returns over the past decade, investors shouldn't assume that it's done growing, not by any stretch. This is a company that continues to have growth on its mind. Its long-term goal is for profits to rise between 13% and 16% per year, due in large part to the growth in its Medicare business.
And that's not an unrealistic growth rate by any means. The company reported earnings in January, and for 2023 its earnings from operations grew 14% year over year to $32.4 billion. UnitedHealth sees potential in many opportunities within healthcare, including value-based care, health technology, health financial services, and pharmacy services as well.
The company's Optum business, for instance, focuses on the services side and helps employers, health systems, and other customers improve the care that they offer while also reducing costs for them. There are many inefficiencies within the healthcare industry that could make Optum a fast-growing business for UnitedHealth Group for years. In 2023, Optum's revenue rose by 24%, while the benefits business, UnitedHealthcare, achieved a more modest growth rate of 13%.
Acquisitions could provide UnitedHealth Group with even more runway
What's promising about UnitedHealth Group is that the business doesn't shy away from acquisitions, which could help send its value even higher by opening up more growth opportunities. Last year the company acquired home health company LHC Group, and it's hoping to close on another home health deal, involving Amedisys, sometime this year.
The dealmaking could very well continue as UnitedHealth generates significant profits and cash flow, which could pave the way for more acquisitions. Although it pays a dividend, with a payout ratio of around 30%, UnitedHealth is in a strong enough position that the recurring payout shouldn't get in the way of it pursuing growth opportunities.
What annual return would UnitedHealth Group stock need to average to get to $1 trillion by 2030?
For UnitedHealth Group stock to get to a $1 trillion valuation, it would need to rise by approximately 115%, which averages out to a compounded annual growth rate of 13.6%. That's higher than the S&P's long-run average of 10%, but given that UnitedHealth is growing its earnings at a fairly strong rate, and it can lean on acquisitions for more opportunities, I believe it could continue to outperform the market until the end of the decade.
By 2030, UnitedHealth Group could very well be worth $1 trillion or more, and there's a chance it could get there even sooner.
Should you invest in UnitedHealth Group stock today?
UnitedHealth Group is a stock I would classify as a no-brainer type of investment. The company's fundamentals are solid, it pays a dividend, and there isn't the business isn't risky. It's a suitable stock for just about any type of investor. Although 2023 was an off year for the healthcare stock (it was down around 1%), its future remains promising, and it could make for an excellent long-term investment.
