What happened

Shares of health insurance stock UnitedHealth Group (UNH -0.04%) climbed 17.8% last month, according to data from S&P Global Market Intelligence.

UnitedHealth beat earnings estimates for the fourth consecutive quarter and raised its full-year guidance. The company now expects to finish 2021 with earnings per share that's about 20% above the prior year.

So what

UnitedHealth's revenue increased 11% last quarter, marking an acceleration from the 6% annual growth rate in the two previous years. That's impressive stuff from an enormous company with 15% share of a mature market. It's hard to achieve those sorts of growth rates at this level of market saturation. UnitedHealth experienced some margin compression relating to insurance taxes, but the revenue growth was still large enough to drive a 20% increase in operating profit. These earnings also translated to strong free cash flow.

Economic uncertainty is casting a gloomy shadow over the whole financial world right now, and health insurers are one of the few industries with relatively reliable cash flows. That's attractive for investors who are seeking safety in a choppy stock market.

Masked healthcare professional reviewing paperwork with a patient.

Image source: Getty Images

Now what

UnitedHealth has earned praise for its growth and efficiency, and it's fair for the stock price to reflect that. That's especially true if investors are stashing capital here as a defensive investment. However, the recent gains might have eliminated any upside available in the stock.

UnitedHealth has expensive valuation ratios. Its forward P/E ratio is now 21.1 and its price-to-book is 5.9. Both are more expensive than peers CVS Health (CVS -1.33%), Anthem (ELV -0.73%), or Cigna (CI -0.26%), even adjusting for growth. These ratios are also at the top end of UnitedHealth's own historical range. There's not much room for further returns through valuation inflation, especially as the Federal Reserve starts tapering to raise interest rates.

The stock pays a 1.2% dividend yield. Even with its very sustainable 33% payout ratio, that dividend yield isn't high enough to carry an income investment portfolio. UnitedHealth has delivered excellent growth so far this year, but it can't be considered a growth stock for the long term. It's too big and too mature. As a value stock, there's not a lot of upside at the current valuation.

UnitedHealth might help protect your stock portfolio from losses if market conditions are difficult, because of its stability. However, the insurance giant isn't immune to bear markets.