Investors pursuing a solid, dependable stock investment can often be led to UnitedHealth Group Incorporated (NYSE:UNH), a large-cap worth US$217.03B. Big corporations are much sought after by risk-averse investors who find diversified revenue streams and strong capital returns attractive. But, its financial health remains the key to continued success. This article will examine UnitedHealth Group’s financial liquidity and debt levels to get an idea of whether the company can deal with cyclical downturns and maintain funds to accommodate strategic spending for future growth. Note that this information is centred entirely on financial health and is a high-level overview, so I encourage you to look further into UNH here. See our latest analysis for UnitedHealth Group
How much cash does UNH generate through its operations?
UNH’s debt level has been constant at around US$31.69B over the previous year – this includes both the current and long-term debt. At this current level of debt, UNH currently has US$15.49B remaining in cash and short-term investments for investing into the business. On top of this, UNH has generated US$13.60B in operating cash flow over the same time period, resulting in an operating cash to total debt ratio of 42.90%, signalling that UNH’s current level of operating cash is high enough to cover debt. This ratio can also be a sign of operational efficiency as an alternative to return on assets. In UNH’s case, it is able to generate 0.43x cash from its debt capital.
Does UNH’s liquid assets cover its short-term commitments?
Looking at UNH’s most recent US$50.46B liabilities, it seems that the business is not able to meet these obligations given the level of current assets of US$33.98B, with a current ratio of 0.67x below the prudent level of 3x.
Can UNH service its debt comfortably?
With a debt-to-equity ratio of 60.92%, UNH can be considered as an above-average leveraged company. This isn’t uncommon for large companies because interest payments on debt are tax deductible, meaning debt can be a cheaper source of capital than equity. Since large-caps are seen as safer than their smaller constituents, they tend to enjoy lower cost of capital. We can put the sustainability of UNH’s debt levels to the test by looking at how well interest payments are covered by earnings. A company generating earnings before interest and tax (EBIT) at least three times its net interest payments is considered financially sound. For UNH, the ratio of 12.82x suggests that interest is amply covered. High interest coverage is seen as a responsible and safe practice, which highlights why most investors believe large-caps such as UNH is a safe investment.
Although UNH’s debt level is towards the higher end of the spectrum, its cash flow coverage seems adequate to meet debt obligations which means its debt is being efficiently utilised. Though its lack of liquidity raises questions over current asset management practices for the large-cap. I admit this is a fairly basic analysis for UNH’s financial health. Other important fundamentals need to be considered alongside. I recommend you continue to research UnitedHealth Group to get a more holistic view of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for UNH’s future growth? Take a look at our free research report of analyst consensus for UNH’s outlook.
Valuation: What is UNH worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether UNH is currently mispriced by the market.
Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.
Source : https://finance.yahoo.com/news/must-know-unitedhealth-group-incorporated-102919750.html