Universal American (NYSE: UAM) and Magellan Health (NASDAQ:MGLN) are both healthcare companies, but which is the superior investment? We will contrast the two companies based on the strength of their dividends, valuation, analyst recommendations, risk, institutional ownership, profitability and earnings.

Analyst Recommendations

This is a breakdown of current recommendations and price targets for Universal American and Magellan Health, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Universal American 0 3 0 0 2.00
Magellan Health 1 0 3 0 2.50

Universal American presently has a consensus target price of $10.00, suggesting a potential upside of 0.30%. Magellan Health has a consensus target price of $80.25, suggesting a potential downside of 0.62%. Given Universal American’s higher possible upside, analysts plainly believe Universal American is more favorable than Magellan Health.

Valuation & Earnings

This table compares Universal American and Magellan Health’s revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Universal American N/A N/A N/A ($0.86) -11.59
Magellan Health $5.28 billion 0.36 $242.58 million $3.53 22.88

Magellan Health has higher revenue and earnings than Universal American. Universal American is trading at a lower price-to-earnings ratio than Magellan Health, indicating that it is currently the more affordable of the two stocks.

Risk & Volatility

Universal American has a beta of 1.74, suggesting that its stock price is 74% more volatile than the S&P 500. Comparatively, Magellan Health has a beta of 0.57, suggesting that its stock price is 43% less volatile than the S&P 500.

Profitability

This table compares Universal American and Magellan Health’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Universal American -5.12% -24.95% -8.23%
Magellan Health 1.59% 8.88% 4.08%

Insider and Institutional Ownership

85.7% of Universal American shares are owned by institutional investors. Comparatively, 93.5% of Magellan Health shares are owned by institutional investors. 7.7% of Universal American shares are owned by insiders. Comparatively, 3.6% of Magellan Health shares are owned by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company will outperform the market over the long term.

Summary

Magellan Health beats Universal American on 8 of the 11 factors compared between the two stocks.

Universal American Company Profile

Universal American Corp. provides an array of health insurance and managed care products and services to people covered by Medicare. The Company’s segments include Medicare Advantage, Management Services Organization (MSO), and Corporate & Other. The Medicare Advantage segment contains the operations of its initiatives in managed care for seniors. It operated 16 Medicare Shared Saving Program Accountable Care Organizations (ACOs) and two Next Generation ACOs, which included approximately 5,200 participating providers with approximately 221,800 assigned Medicare fee-for-service beneficiaries, as of December 31, 2016. The MSO segment supports its physician partnerships in the development of healthcare models, such as ACOs, with a range of capabilities and resources, including technology, analytics, clinical care coordination, regulatory compliance and program administration. It has developed a primary care physician alignment strategy, which is branded as The Healthy Collaboration.

Magellan Health Company Profile

Magellan Health, Inc. is engaged in the healthcare management business. The Company’s segments include Healthcare, Pharmacy Management and Corporate. It is focused on managing special populations, complete pharmacy benefits and other specialty areas of healthcare. Its Healthcare includes its management of behavioral healthcare services and employee assistance program (EAP) services, management of other specialty areas, including diagnostic imaging and musculoskeletal management, and the integrated management of physical, behavioral and pharmaceutical healthcare for special populations, delivered through Magellan Complete Care (MCC). Its Pharmacy Management segment consists of products and solutions that provide clinical and financial management of pharmaceuticals paid under medical and pharmacy benefit programs. Its Corporate segment consists primarily of operational support functions. It provides services to health plans and other managed care organizations (MCOs).

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