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When thinking of healthcare, two familiar companies, Humana (HUM - Free Report) and UnitedHealth Group (UNH - Free Report) , typically come to mind.
Both companies reside in the Zacks Medical – HMOs Industry, which is currently ranked in the top 37% of all Zacks Industries. Due to the industry’s favorable ranking, we expect it to outperform the market over the next three to six months.
Below is a chart illustrating the YTD performance of the industry with the S&P 500 blended in as a benchmark.
Image Source: Zacks Investment Research
Studies have shown that 50% of a stock's price movement can be attributed to the group it’s in, making it crucial to ensure that investors target stocks in a thriving industry.
In fact, the top 50% of Zacks Ranked Industries outperform the bottom 50% by a factor of more than two to one.
With both being titans residing in the same industry that’s thriving, it raises a valid question – which company looks like a better investment?
To find the answer, let’s compare several metrics of each company.
Share Performance
The chart below is fascinating. Year-to-date, the price action of UnitedHealth and Humana shares has been nearly identical, providing investors with roughly a 4% return.
Image Source: Zacks Investment Research
However, there’s a clear winner upon stretching out the timeframe to encompass the last year of price action – UnitedHealth.
Humana’s return of 17% widely lags UNH’s 26% gain.
Image Source: Zacks Investment Research
Valuation
Pivoting to valuation, Humana’s 19.3X forward earnings multiple is certainly cheaper than UnitedHealth’s 23.7X.
In addition, HUM’s forward earnings multiple is just below its five-year median of 19.8X, whereas UNH’s is well above its five-year median of 19.9X.
Image Source: Zacks Investment Research
Further, Humana sports a Style Score of an A for Value; UnitedHealth carries a Style Score of a B for Value.
Growth Estimates
For obvious reasons, one of the most critical aspects that sets companies apart is projected growth. If a company isn’t growing, why would an investor buy shares?
For Humana’s current fiscal year (FY22), the Zacks Consensus EPS Estimate is $24.85, good enough for a stellar 20% Y/Y uptick in earnings. And in FY23, the company’s bottom-line is projected to tack on an additional 12%.
Top-line growth is also stellar – Humana’s top-line is forecasted to expand by a steep 12% in FY22 and a further 9% in FY23.
Image Source: Zacks Investment Research
UnitedHealth also carries rock-solid growth prospects – the Zacks Consensus EPS Estimate of $21.88 for FY22 pencils in a substantial 15% Y/Y uptick in earnings. In FY23, UNH’s earnings are forecasted to grow a further 12%.
UNH’s top-line is also in great shape – the Zacks Consensus Sales Estimate of $322 billion for FY22 registers a 12% Y/Y uptick. And in FY23, the company’s top-line looks to add an additional 8% in growth.
Image Source: Zacks Investment Research
Dividends
Who doesn’t love getting paid? Fortunately for those seeking an income stream, both companies shell out dividends.
UNH’s 1.3% annual dividend yield is notably higher than HUM’s 0.7% annual yield, as shown in the chart below.
Image Source: Zacks Investment Research
UNH has upped its dividend payout five times over the last five years, paired with an awe-inspiring 17.6% five-year annualized dividend growth rate.
While UNH’s yield is higher, a few other aspects of Humana’s dividend metrics are more robust – HUM has upped its dividend payout six times over the last five years, paired with a stellar 22.7% five-year annualized dividend growth rate.
Bottom Line
It’s not easy to choose between these two healthcare heavyweights, as they’ve both established themselves as serious players in the market.
Still, one’s got to come out on top, and it appears that Humana is the winner in this fight, and here’s why – shares are much cheaper, growth estimates are more substantial, and most importantly, HUM sports a Zacks Rank #2 (Buy) vs. UNH’s Zacks Rank #3 (Hold).
Humana’s (HUM - Free Report) favorable Zacks Rank proved to be the tipping point here, as it tells us that its earnings outlook is more robust than UnitedHealth’s (UNH - Free Report) .
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Humana vs. UnitedHealth: What's the Better Buy?
When thinking of healthcare, two familiar companies, Humana (HUM - Free Report) and UnitedHealth Group (UNH - Free Report) , typically come to mind.
Both companies reside in the Zacks Medical – HMOs Industry, which is currently ranked in the top 37% of all Zacks Industries. Due to the industry’s favorable ranking, we expect it to outperform the market over the next three to six months.
Below is a chart illustrating the YTD performance of the industry with the S&P 500 blended in as a benchmark.
Image Source: Zacks Investment Research
Studies have shown that 50% of a stock's price movement can be attributed to the group it’s in, making it crucial to ensure that investors target stocks in a thriving industry.
In fact, the top 50% of Zacks Ranked Industries outperform the bottom 50% by a factor of more than two to one.
With both being titans residing in the same industry that’s thriving, it raises a valid question – which company looks like a better investment?
To find the answer, let’s compare several metrics of each company.
Share Performance
The chart below is fascinating. Year-to-date, the price action of UnitedHealth and Humana shares has been nearly identical, providing investors with roughly a 4% return.
Image Source: Zacks Investment Research
However, there’s a clear winner upon stretching out the timeframe to encompass the last year of price action – UnitedHealth.
Humana’s return of 17% widely lags UNH’s 26% gain.
Image Source: Zacks Investment Research
Valuation
Pivoting to valuation, Humana’s 19.3X forward earnings multiple is certainly cheaper than UnitedHealth’s 23.7X.
In addition, HUM’s forward earnings multiple is just below its five-year median of 19.8X, whereas UNH’s is well above its five-year median of 19.9X.
Image Source: Zacks Investment Research
Further, Humana sports a Style Score of an A for Value; UnitedHealth carries a Style Score of a B for Value.
Growth Estimates
For obvious reasons, one of the most critical aspects that sets companies apart is projected growth. If a company isn’t growing, why would an investor buy shares?
For Humana’s current fiscal year (FY22), the Zacks Consensus EPS Estimate is $24.85, good enough for a stellar 20% Y/Y uptick in earnings. And in FY23, the company’s bottom-line is projected to tack on an additional 12%.
Top-line growth is also stellar – Humana’s top-line is forecasted to expand by a steep 12% in FY22 and a further 9% in FY23.
Image Source: Zacks Investment Research
UnitedHealth also carries rock-solid growth prospects – the Zacks Consensus EPS Estimate of $21.88 for FY22 pencils in a substantial 15% Y/Y uptick in earnings. In FY23, UNH’s earnings are forecasted to grow a further 12%.
UNH’s top-line is also in great shape – the Zacks Consensus Sales Estimate of $322 billion for FY22 registers a 12% Y/Y uptick. And in FY23, the company’s top-line looks to add an additional 8% in growth.
Image Source: Zacks Investment Research
Dividends
Who doesn’t love getting paid? Fortunately for those seeking an income stream, both companies shell out dividends.
UNH’s 1.3% annual dividend yield is notably higher than HUM’s 0.7% annual yield, as shown in the chart below.
Image Source: Zacks Investment Research
UNH has upped its dividend payout five times over the last five years, paired with an awe-inspiring 17.6% five-year annualized dividend growth rate.
While UNH’s yield is higher, a few other aspects of Humana’s dividend metrics are more robust – HUM has upped its dividend payout six times over the last five years, paired with a stellar 22.7% five-year annualized dividend growth rate.
Bottom Line
It’s not easy to choose between these two healthcare heavyweights, as they’ve both established themselves as serious players in the market.
Still, one’s got to come out on top, and it appears that Humana is the winner in this fight, and here’s why – shares are much cheaper, growth estimates are more substantial, and most importantly, HUM sports a Zacks Rank #2 (Buy) vs. UNH’s Zacks Rank #3 (Hold).
Humana’s (HUM - Free Report) favorable Zacks Rank proved to be the tipping point here, as it tells us that its earnings outlook is more robust than UnitedHealth’s (UNH - Free Report) .