UnitedHealth Group (NYSE: UNH) and Humana (NYSE:HUM) are both large-cap medical companies, but which is the better business? We will contrast the two businesses based on the strength of their analyst recommendations, dividends, profitabiliy, risk, earnings, valuation and institutional ownership.

Institutional and Insider Ownership

86.3% of UnitedHealth Group shares are owned by institutional investors. Comparatively, 99.1% of Humana shares are owned by institutional investors. 0.9% of UnitedHealth Group shares are owned by company insiders. Comparatively, 0.8% of Humana shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock will outperform the market over the long term.

Earnings & Valuation

This table compares UnitedHealth Group and Humana’s top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
UnitedHealth Group $192.60 billion 0.98 $15.57 billion $8.54 22.35
Humana $54.34 billion 0.63 $2.27 billion $9.85 23.91

UnitedHealth Group has higher revenue and earnings than Humana. UnitedHealth Group is trading at a lower price-to-earnings ratio than Humana, indicating that it is currently the more affordable of the two stocks.

Analyst Ratings

This is a summary of recent ratings for UnitedHealth Group and Humana, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
UnitedHealth Group 0 0 21 0 3.00
Humana 0 7 12 0 2.63

UnitedHealth Group currently has a consensus price target of $199.55, suggesting a potential upside of 4.54%. Humana has a consensus price target of $234.89, suggesting a potential downside of 0.26%. Given UnitedHealth Group’s stronger consensus rating and higher possible upside, equities analysts clearly believe UnitedHealth Group is more favorable than Humana.

Profitability

This table compares UnitedHealth Group and Humana’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
UnitedHealth Group 4.32% 21.52% 6.81%
Humana 2.71% 14.38% 5.44%

Risk & Volatility

UnitedHealth Group has a beta of 0.63, indicating that its stock price is 37% less volatile than the S&P 500. Comparatively, Humana has a beta of 0.91, indicating that its stock price is 9% less volatile than the S&P 500.

Dividends

UnitedHealth Group pays an annual dividend of $3.00 per share and has a dividend yield of 1.6%. Humana pays an annual dividend of $1.60 per share and has a dividend yield of 0.7%. UnitedHealth Group pays out 35.1% of its earnings in the form of a dividend. Humana pays out 16.2% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. UnitedHealth Group has raised its dividend for 6 consecutive years and Humana has raised its dividend for 7 consecutive years.

Summary

UnitedHealth Group beats Humana on 11 of the 17 factors compared between the two stocks.

About UnitedHealth Group

UnitedHealth Group Incorporated is a health and well-being company. The Company operates through four segments: UnitedHealthcare, OptumHealth, OptumInsight and OptumRx. It conducts its operations through two business platforms: health benefits operating under UnitedHealthcare and health services operating under Optum. UnitedHealthcare provides healthcare benefits to an array of customers and markets, and includes UnitedHealthcare Employer & Individual, UnitedHealthcare Medicare & Retirement, UnitedHealthcare Community & State, and UnitedHealthcare Global businesses. Optum is a health services business serving the healthcare marketplace, including payers, care providers, employers, governments, life sciences companies and consumers, through its OptumHealth, OptumInsight and OptumRx businesses. OptumInsight provides services, technology and healthcare solutions to participants in the healthcare industry. OptumRx provides retail network contracting, purchasing and clinical solutions.

About Humana

Humana Inc. is a health and well-being company. The Company’s segments include Retail, Group and Specialty, Healthcare Services and Individual Commercial. The Retail segment consists of Medicare benefits, as well as individual commercial fully insured medical and specialty health insurance benefits, including dental, vision, and other supplemental health and financial protection products. The Group and Specialty segment consists of employer group commercial fully insured medical and specialty health insurance benefits, including dental, vision, and other supplemental health. The Healthcare Services segment includes services offered to its health plan members, as well as to third parties, including pharmacy solutions, provider services, home-based services and clinical programs, as well as services and capabilities to manage population health. The Individual Commercial segment includes Individual Commercial products marketed under the HumanaOne brand.

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