This Health Insurance Company Is a Better Choice than UnitedHealth Stock

We believe that Cigna share price (NYSE: CI ) is a better choice UnitedHealth company’s opinion (NYSE: UNH), given better prospects. Even Cigna
trading at a lower trailing price of 0.5x, compared to UnitedHealth’s 1.6x, this difference in valuation makes sense, given its profitability and lower financial risk. Looking at stock returns, CI stock, with a 23% return this year, has outperformed UNH stock, which is up only 3%. Both stocks have outperformed the broader indices, with the S&P 500 index down 17% over the period. There’s more to the comparison, and in the sections below, we discuss why we believe CI will outperform UNH over the next three years. We compare a number of factors such as past investment growth, returns, and valuations in a dashboard analysis UnitedHealth vs. Cigna: Which stock is better? Parts of the analysis are summarized below.

1. Cigna’s Revenue Growth in Recent Years Has Been Strong

  • Both companies have seen sales growth in recent quarters, but UnitedHealth has seen the fastest revenue growth of 12.7% over the past twelve months, compared to Cigna’s 7.6%.
  • However, if we look at the long term, Cigna has done well. While UnitedHealth’s sales increased by an average of 8.4% to $287.6 billion in 2021, compared to $226.2 billion in 2018, Cigna saw its revenue increase by an average of 76.2% to $174.1 billion from $48.7 billion in the same period.
  • The big increase in Cigna’s earnings can be attributed to its acquisition of Express Scripts in Dec 2018.
  • Recently, Cigna is seeing an uptick in its pharmacy management business, driven by rising costs of generic drugs and higher claims. The company has also seen the number of medical customers increase to 17.8 million at the moment, compared to 17.1 million in 2019, before the pandemic.
  • For UnitedHealth, revenue growth was driven by growth in its OptumHealth business, which provides health care through local health care groups. In perspective, OptumHealth’s revenue grew 124% between 2018 and 2021, compared to a 30% increase for the company as a whole.
  • The growth in Optum Health’s business can be attributed to the increase in the number of patients treated under the company’s plans, including home services.
  • The total number of UnitedHealth enrollees is increasing, currently at 51.2 million, compared to 49.2 million in 2019, before the pandemic.
  • Ours UnitedHealth Revenue and Cigna Revenue dashboards provide information at company level.
  • Looking ahead, Cigna’s earnings are expected to grow faster than UnitedHealth’s over the next three years. The table below summarizes our expectations for the two companies over the next three years. It points to a 16.2% CAGR for Cigna, compared to a 7.7% CAGR for UnitedHealth, based on Trefis Machine Learning analysis.
  • Note that we have different strategies for businesses that have been affected by Covid and those that have not been affected or affected by Covid while predicting the future. For companies that have been hit hard by Covid, we consider a quarterly return method to predict returns to pre-Covid interest rates. Beyond the recovery period, we use the annual rate observed in the three years prior to Covid to estimate the return to normality. For companies registering economic growth during the Covid period, we consider the average growth of the year before the Covid with some weight on the growth during the Covid and the previous twelve months.

2. UnitedHealth Is Very Profitable, And Offers Low Risk

  • UnitedHealth’s operating margin of 8.7% over the past twelve months is better than Cigna’s 4.5%.
  • This compares to 8.8% and 5.5% figures seen in 2019, before the pandemic, respectively.
  • If we look at recent growth in margins, both companies have seen a decline, but UnitedHealth is slightly better, with the last twelve months vs.
  • UnitedHealth’s 7.5% interest rate is also better than Cigna’s 5.4%.
  • Ours UnitedHealth Operating Income and Cigna Operating Income dashboards have more information.
  • Looking at financial risk, UnitedHealth fares better than Cigna. Its 10.5% debt-to-income ratio is significantly lower than Cigna’s 36.9%, while its 12.1% debt-to-income ratio is significantly higher than Cigna’s 3.4%. UnitedHealth’s better credit and liquidity means that financial risk is low.

3. The Web of Everything

  • We feel that UnitedHealth is more profitable than Cigna and offers lower financial risk. On the other hand, Cigna has seen financial growth in recent years, and is available at a lower cost than UnitedHealth.
  • Now, looking at prospects, using P/S as a base, due to the high volatility of P/E and P/EBIT, we believe Cigna is currently the better choice of the two.
  • The table below summarizes our earnings and expectations for UnitedHealth and Cigna over the next three years and shows expected returns. 37% for Cigna at this time against the bus 9% expected return of UNH, which means that investors are better off buying CI on UNH, based on Trefis Machine Learning analysis – UnitedHealth vs. Cigna – which also provides information on how we arrive at these numbers.

Although CI’s assets may exceed UNH’s, it is useful to see how UnitedHealth Groups value on the metrics they need. You will find some important comparisons of companies in all industries Comparing Friends.

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