The market has plenty of sexy stocks that are blazing new paths in exciting, experimental industries. And UnitedHealth Group (UNH +1.17%) is not one of them.
Let's be clear: Not every stock can be sexy. But when it comes to investing, fundamentals trump optics. Health insurance might not be the most exciting business, but it is a vital part of the economy. Moreover, as the U.S. population ages in the coming decades, healthcare will continue to grow in importance.
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UnitedHealth has blown away the broader market
Remember the fable The Tortoise and the Hare? Written by Aesop over 2,000 years ago, its message is that slow and steady can beat fast but flighty.
Look no further than the chart below to see this principle in action. Over the last three years, UnitedHealth Group (clearly the tortoise) has beaten Zoom Video Communications (clearly the hare) hands down. Despite Zoom's enormous pop in 2020, shares are actually lower three years on.
UNH total return level; data by YCharts.
Meanwhile, UnitedHealth Group is up 72%. That compares to a mere 24% gain for the Dow Jones Industrial Average, which counts UnitedHealth Group as its largest component.
UnitedHealth Group's stellar fundamentals power it higher year after year
There's no secret to UnitedHealth Group's success. It's a mammoth company operating in a lucrative and vital sector of the economy.
The company employs over 340,000 people and serves more than 146 million customers. It executes over 1.1 trillion health-related transactions (billings) annually.
What's more, its business isn't cyclical. And that means the company can steadily grow revenue year in and year out. Over the last three years, UnitedHealth has averaged revenue growth of 10%, despite all the challenges posed to a healthcare insurer when facing a pandemic.
UNH revenue (quarterly YoY growth); data by YCharts. YoY = year over year.
Is UnitedHealth still a buy?
Even after its fantastic run over the last three years, I think UnitedHealth Group remains an excellent stock. The company has a terrific moat due to its large customer base and the indispensable nature of its services.
Wall Street agrees and predicts UnitedHealth Group will continue its outperformance. Analysts expect the company to generate $356 billion in revenue in 2023, up from $324 billion in 2022, an increase of 10%.
Meanwhile, earnings estimates for 2024 are $24.95 per share. That gives UnitedHealth a forward price-to-earnings ratio of 19.7 -- not bad for a company with a history of beating estimates.
For investors looking for a stock Aesop would love, UnitedHealth Group might be the one for you.
