Shareholders of UnitedHealth Group (NYSE:UNH) faced a rough start to 2006, as did the shareholders of some of the company's major competitors, including Aetna (NYSE:AET) and Cigna (NYSE:CI). Fortunately, though, UnitedHealth's stock price has since stabilized and the company has turned the page, recently anointing Stephen J. Hemsley as its new CEO.

In the first quarter of the year, the company turned in net EPS of $0.63, for a 15% increase over its 2005 first-quarter net EPS of $0.55. Quarterly revenues increased by 58%, aided by the acquisition of PacifiCare. The company's consolidated medical care ratio did increase in the first quarter as a result of this acquisition, and the stock continuously declined during the quarter. Also playing a role in the decline were allegations pertaining to the backdating of stock options by management and general valuation concerns pertaining to the health-insurance industry as a whole. UnitedHealth did see value in itself, though; the company repurchased 30 million of its own shares during the first quarter, accounting for 2% of its total outstanding shares. Management also revised its full-year outlook upward, to a range representing 22% to 24% growth over comparable 2005 results.

In the second quarter of 2006, UnitedHealth saw its revenue increase by 57% as its EPS increased by 21%. The company made an additional share repurchase of 10 million shares during the second quarter. Management became increasingly optimistic with respect to the company's full-year prospects. Then-Chairman and CEO William McGuire said, "Our operating momentum now supports earnings-per-share growth in the range of 23% to 25% in 2006, a further advance over our outlook of three months ago."

In the third quarter of the year, UnitedHealth replicated the operating success of the previous two quarters. The insurer reported EPS of $0.79, which reflected a 30% increase over the prior year. The company experienced a 55% jump in consolidated revenues, and once again, management revised its full-year guidance upward. Mr. Hemsley, the incoming CEO, noted bright growth prospects for the company as he said, "We anticipate strong continued growth into 2007, with revenues in the area of $79 billion and 2007 earnings per share growth of 15% above the range of $2.95 to $2.97 per share we now project for 2006."

Overall, shareholders who were in UnitedHealth at the beginning of the year are currently down about 22%. The company did have an impressive second half to 2006, however, and it looks to continue to do the same in 2007. It presently trades at a relatively cheap forward P/E of 16.

So what will 2007 have in store for UnitedHealth shareholders? Our Motley Fool CAPS community members have spoken. Take a look at how the overall sentiment stacks up:

CAPS Rating

*****

Total Bulls

921

Total Bears

28

Bull Ratio

33:1

Bear Ratio

0.3:1


You can see that the majority of CAPS players have love for the stock, and it has the top five-star rating. In fact, this is what CAPS player Harry0925 had to say about UnitedHealth: "It looks like all of the scandal is gone, and now that the smoke has cleared this company still has ridiculous sales."

I personally am expecting nothing less from UnitedHealth when it announces its fourth-quarter and full-year 2006 results in early 2007. Although the backdating scandal seems far from over for McGuire, it no longer appears to be a drag on UnitedHealth's stock price. The company also appears to have its medical care ratio under control and continues to grow at an impressive rate for an already colossal power.

Check out the other companies featured in "The Motley Fool's 2006 in Review and 2007 Preview" special.

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Fool contributor Billy Fisher does not own shares of any of the companies mentioned. The Fool has a disclosure policy.