UnitedHealth Group (UNH 0.30%) and Johnson & Johnson (JNJ -0.46%) are two of the largest healthcare companies in the world. One is focused on health insurance, while the other makes medical devices and pharmaceuticals. They both pay dividends and have generated good returns for investors over the years. But which one is the best option for growth-oriented investors today?

UnitedHealth's endless pursuit of acquisitions could make it an underrated growth investment

A health insurance company may not attract many growth investors, as that type of business isn't typically associated with high growth. And I suspect that's a key reason why the stock is fairly undervalued today, trading at only 18 times its estimated future profits. The S&P 500, by comparison, averages a multiple of 21.

UnitedHealth is more than just a health insurance company, however. Over the years, it has been expanding into analytics, home health, and other services. The company was even using deep learning and artificial intelligence years before it was a popular trend, to help improve workflows in Optum, its health services business.

The company expects to average a long-term earnings growth rate between 13% and 16% as its Medicare business expands. Even though costs have been rising, UnitedHealth has been fairly efficient and able to grow its bottom line.

Earlier this month, the company wrapped up another successful year for 2023, posting its full-year and fourth-quarter results. Revenue totaled $371.6 billion last year and grew by 15% while operating income had a similar increase of 14%.

Over the past decade, UnitedHealth has been one of the best healthcare stocks to own, with its share price generating returns in excess of 600%. And with the company still performing well and highly profitable, it wouldn't be surprising for this to remain an excellent option for growth investors.

Will Johnson & Johnson's growth strategy pay off?

Last year, Johnson & Johnson spun off its consumer health business into Kenvue. The move has allowed the healthcare giant to focus more on faster-growing areas of its business, such as medical devices and pharmaceuticals.

On Tuesday, the company reported its year-end earnings numbers. In 2023, revenue of $85.2 billion rose by nearly 7%, but the company says its operational growth rate would have been 9% when excluding COVID-19 vaccine revenue. Earnings, however, were down by 15% as the company's bottom line was weighed down by other expenses, including $7.2 billion in litigation-related fees.

Johnson & Johnson projects that between now and the end of the decade, it will be able to grow its revenue at an average rate between 5% and 7%, on an operational basis. Like UnitedHealth, Johnson & Johnson has also been looking to acquisitions to bolster its growth prospects. In 2022, it acquired heart pump maker Abiomed for $16.6 billion and earlier this month it announced plans to buy oncology company Ambrx Biopharma for $2 billion.

Johnson & Johnson's growth, however, faces multiple obstacles. One of the reasons its growth may be limited is due to losses in exclusivity in Stelara, one of its leading drugs. There's also the litigation risk it faces related to talc lawsuits. There are still more than 50,000 cases it needs to resolve involving its talc products, which plaintiffs allege have caused them to develop cancer. Those litigation costs could result in tens of billions of dollars in expenses, if not more, which may hinder the company's growth prospects.

UnitedHealth is hands-down the better buy

Not only is UnitedHealth's long-term growth rate more promising, but the stock is less of a risk for investors than Johnson & Johnson, whose ongoing talc lawsuits could potentially weigh down the business in the long run. For growth investors, UnitedHealth is the clear choice and its low valuation today only sweetens the deal.