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from the world of economics and financeWe believe that the healthcare stocks UnitedHealth (NYSE: UNH) and Humana (NYSE:HUM) will likely see higher levels and offer similar returns in the next three years. Humana stock trades at 0.4x trailing revenues versus 1.1x for UnitedHealth, due to the latter’s superior profitability, financial position, and a slightly better revenue growth. The decision to invest often comes down to finding the best stocks within the parameters of certain characteristics that suit an investment style. The size of profits can matter, as larger profits can imply greater market power. In the sections below, we discuss the possible returns for UNH and HUM in the next three years. We compare a slew of factors, such as historical revenue growth, returns, and valuation, in an interactive dashboard analysis of Humana vs. UnitedHealth: Which Stock Is A Better Bet? Parts of the analysis are summarized below.
Firstly, looking at stock returns, UNH stock has shown strong gains of 30% from levels of $350 in early January 2021 to around $460 now, while HUM stock has faced a notable decline of 25% from levels of $410 to around $310 over the same period. This compares with an increase of about 40% for the S&P 500 over this roughly three-year period.
However, the changes in UNH and HUM stocks have been far from consistent. Returns for UNH stock were 43% in 2021, 6% in 2022, and -1% in 2023, while returns for HUM stood at 13%, 10%, and -11%, in 2021, 2022, and 2023, respectively. In comparison, the S&P 500 surged 27% in 2021, but it fell by 19% in 2022, and rose by 24% in 2023. This indicates that UNH underperformed the S&P in 2023, while HUM underperformed the S&P in 2021 and 2023.
In fact, consistently beating the S&P 500 — in good times and bad — has been difficult over recent years for individual stocks; for other heavyweights in the Health Care sector including LLY, JNJ, and MRK, and even for the megacap stars GOOG, TSLA, and MSFT. In contrast, the Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has outperformed the S&P 500 each year over the same period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.
Given the current uncertain macroeconomic environment with high oil prices and elevated interest rates, could UNH and HUM face a similar situation as they did in 2023 and underperform the S&P over the next 12 months — or will they see a strong jump? We expect both stocks to trend higher and offer similar returns in the next three years.
1. UnitedHealth’s Revenue Growth Is Better
2. UnitedHealth Is More Profitable
3. The Net of It All
While HUM and UNH may offer similar returns in the next three years, it is helpful to see how UnitedHealth Group’s Peers fare on metrics that matter. You will find other valuable comparisons for companies across industries at Peer Comparisons.
Returns | Apr 2024 MTD [1] | 2024 YTD [1] | 2017-24 Total [2] |
UNH Return | -7% | -13% | 187% |
HUM Return | -11% | -33% | 51% |
S&P 500 Return | -1% | 9% | 133% |
Trefis Reinforced Value Portfolio | -2% | 5% | 644% |
[1] Returns as of 4/4/2024
[2] Cumulative total returns since the end of 2016
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.