UnitedHealth Group (UNH +1.17%) has a market capitalization of close to $500 billion and is one of the largest healthcare stocks you can invest in today. That means if it were to double in value, it would reach a $1 trillion valuation -- a distinction that no healthcare stock has achieved thus far.
While it's unlikely that the health insurance giant will double in value in a year or two, it's definitely a possibility in the long run; the stock has doubled in just the past five years. Can UnitedHealth Group stock do that again and grow to a value of $1 trillion by 2030?
NYSE: UNH
Key Data Points
The company is focused on growth
A key reason UnitedHealth Group could get to a $1 trillion market cap is the company's relentless pursuit of growth. UnitedHealth's broad business involves not just health insurance, but analytics as well. And the company hasn't been afraid to get bigger and diversify via acquisitions.
Earlier this year, UnitedHealth acquired home health company LHC Group for $5.4 billion. In June, it also announced plans to acquire another home health company, Amedisys, for $3.3 billion. With a rising senior population in the coming years, UnitedHealth appears to be planning ahead for what's likely to be a growing demand for home health services.
These deals can play a key part in UnitedHealth's long-term growth, particularly when it comes to caring for seniors. Management's long-term goal is for earnings to grow between 13% and 16% annually. If UnitedHealth can deliver on those types of numbers, it's hard to dislike the prospects for the healthcare stock to continue rising in value.
UnitedHealth's valuation isn't expensive
Despite being one of the most valuable healthcare companies, UnitedHealth Group stock provides investors with good value. Trading at around 23 times its earnings, it's a cheap stock compared to the average healthcare stock, which trades at a multiple of 28.
Valuation is an important consideration. As a relatively low-priced stock, UnitedHealth could have more room to rise. Investors could be willing to pay a higher premium for the shares if the company is able to sustain a high level of growth. Over the years, investors have shown they are willing to pay more of a premium for the business. And that's a trend that can continue as UnitedHealth keeps focusing on growth.
UNH PE Ratio data by YCharts
It can get to $1 trillion -- the only question is when
If all UnitedHealth Group's stock does is mimic the S&P 500 index's long-term average of 10% annual growth, then after approximately seven years (by the end of 2030), the stock would be right around the $1 trillion mark. But UnitedHealth has normally been a market-beating investment. And if it averages an annual return of at least 12%, then it would take close to six years for it to double in value.
Overall, the odds look good that UnitedHealth Group will be able to reach a $1 trillion valuation by 2030. The company's continued growth and relatively modest price make it highly probable that the stock can reach that valuation. And that means it can make an excellent stock to add to your portfolio today.
