Continue to hold UnitedHealth based on its current debt obligations?

UnitedHealth Group is scheduled to announce its earnings tomorrow. The upcoming quarterly report is expected on the 15th of July 2020. UnitedHealth Group Average Assets are most likely to increase significantly in the upcoming years. The last year's value of Average Assets was reported at 108.88 Billion. The current Earnings Before Interest Taxes and Depreciation Amortization EBITDA is estimated to increase to about 23.1 B, while Average Equity is projected to decrease to roughly 26.2 B. As many of us are excited about healthcare space, it is fair to concentrate on UnitedHealth Group Incorporated as a unique alternative. Why are we still confident in our anticipation of a recovery?
Published over a year ago
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Reviewed by Vlad Skutelnik

UnitedHealth Group has 51.61 B in debt with debt to equity (D/E) ratio of 0.84, which is OK given its current industry classification. The entity has 51.61 B in debt with debt to equity (D/E) ratio of 0.84, which is OK given its current industry classification. The firm has a current ratio of 0.7, suggesting that it has not enough short term capital to pay financial commitments when the payables are due. The asset utilization indicator refers to the revenue earned for every dollar of assets a company currently reports. UnitedHealth Group has an asset utilization ratio of 221.36 percent. This implies that the company is making $2.21 for each dollar of assets. An increasing asset utilization means that UnitedHealth Group Incorporated is more efficient with each dollar of assets it utilizes for everyday operations.
UnitedHealth Group financial leverage ratio helps determine the effect of debt on the overall profitability of the company. It measures the total debt position of UnitedHealth Group, including all of UnitedHealth Group's outstanding debt obligations, and compares it with the equity. In simple terms, the high financial leverage means the cost of production, together with running the business day-to-day, is high, whereas, lower financial leverage implies lower fixed cost investment in the business and generally considered by investors to be a good sign. So if creditors own a majority of UnitedHealth Group assets, the company is considered highly leveraged. Understanding the composition and structure of overall UnitedHealth Group debt and outstanding corporate bonds gives a good idea of how risky the capital structure of a business is and if it is worth investing in it. Please read more on our technical analysis page.

Understanding UnitedHealth Total Debt

UnitedHealth Group liabilities are broken down into two parts on the balance sheet. These are short-term (or current) obligations and long-term debt. UnitedHealth Group has to fulfill its short-term liabilities in this reporting year and should be no more than 12 months old. Long-term debt, on the other hand, is anything beyond the 12-month payment timeframe. Common short-term liabilities found on UnitedHealth Group balance sheet include debt obligations and money owed to different UnitedHealth Group vendors, workers, and loan providers. Below is the chart of UnitedHealth main long-term debt accounts currently reported on its balance sheet.
You can use UnitedHealth Group Incorporated financial leverage analysis tool to get a better grip on understanding its financial position

How important is UnitedHealth Group's Liquidity

UnitedHealth Group financial leverage refers to using borrowed capital as a funding source to finance UnitedHealth Group Incorporated ongoing operations. It is usually used to expand the firm's asset base and generate returns on borrowed capital. UnitedHealth Group financial leverage is typically calculated by taking the company's all interest-bearing debt and dividing it by total capital. So the higher the debt-to-capital ratio (i.e., financial leverage), the riskier the company. Financial leverage can amplify the potential profits to UnitedHealth Group's owners, but it also increases the potential losses and risk of financial distress, including bankruptcy, if the firm cannot cover its debt costs. The degree of UnitedHealth Group's financial leverage can be measured in several ways, including by ratios such as the debt-to-equity ratio (total debt / total equity), equity multiplier (total assets / total equity), or the debt ratio (total debt / total assets). Please check the breakdown between UnitedHealth Group's total debt and its cash.

Breaking it down a bit more

The modest gains experienced by current holders of UnitedHealth Group has created some momentum for investors as it was traded today as low as 296.71 and as high as 309.74 per share. The company directors and management have been quite successful in maneuvering the stock at opportune times to take advantage of all market conditions in June. The stock standard deviation of daily returns for 30 days investing horizon is currently 2.17. The current volatility is consistent with the ongoing market swings in June 2020 as well as with UnitedHealth Group unsystematic, company-specific events.

Asset Breakdown

86.4 B
Assets Non Current
54.5 B
Goodwill
34.6 B
Current Assets
Total Assets187.62 Billion
Current Assets34.55 Billion
Assets Non Current86.36 Billion
Goodwill54.5 Billion
Tax Assets447.43 Million

Are UnitedHealth Group technical ratios showing a correction?

Current mean deviation is at 1.61. UnitedHealth Group Incorporated currently demonstrates below-verage downside deviation of 2.32. It has Information Ratio of 0.03 and Jensen Alpha of 0.11. However, we do advice investors to further question UnitedHealth Group Incorporated expected returns to ensure all indicators are consistent with the current outlook about its relatively low value at risk.

The Bottom Line

Even though some companies within the healthcare plans industry are still a little expensive, even after the recent corrections, UnitedHealth Group may offer a potential longer-term growth to stockholders. With an optimistic outlook on your 30 days horizon, it may be a good time to buy new shares of UnitedHealth or increase your existing holdings in the Stock as it seems the potential growth has not yet been fully factored into the current price. Please use our equity advice module to run different scenarios to ensure your current risk level and investment horizon are fully reflective of your current investing preferences in regards to UnitedHealth Group.

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Editorial Staff

This story should be regarded as informational only and should not be considered a solicitation to sell or buy any financial products. Macroaxis does not express any opinion as to the present or future value of any investments referred to in this post. This post may not be reproduced without the consent of Macroaxis LLC. Macroaxis LLC and Rifka Kats do not own shares of UnitedHealth Group Incorporated. Please refer to our Terms of Use for any information regarding our disclosure principles.

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