Intrinsic value of UnitedHealth Group - UNH

Previous Close

$193.20

  Intrinsic Value

$183.79

stock screener

  Rating & Target

hold

-5%

  Value-price divergence*

-57%

Previous close

$193.20

 
Intrinsic value

$183.79

 
Up/down potential

-5%

 
Rating

hold

 
Value-price divergence*

-57%

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of UNH stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2016), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 186.4

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  17.65
  7.70
  7.43
  7.19
  6.97
  6.77
  6.59
  6.43
  6.29
  6.16
  6.05
  5.94
  5.85
  5.76
  5.69
  5.62
  5.56
  5.50
  5.45
  5.41
  5.36
  5.33
  5.30
  5.27
  5.24
  5.22
  5.19
  5.17
  5.16
  5.14
  5.13
Revenue, $m
  0
  199,073
  213,864
  229,234
  245,208
  261,812
  279,077
  297,035
  315,723
  335,178
  355,443
  376,562
  398,581
  421,549
  445,520
  470,547
  496,691
  524,010
  552,570
  582,438
  613,684
  646,383
  680,612
  716,452
  753,989
  793,312
  834,515
  877,697
  922,960
  970,412
  1,020,167
Variable operating expenses, $m
 
  184,771
  198,146
  212,045
  226,489
  241,504
  257,115
  273,354
  290,253
  307,846
  326,170
  340,509
  360,419
  381,188
  402,864
  425,496
  449,136
  473,840
  499,665
  526,673
  554,928
  584,496
  615,448
  647,856
  681,799
  717,358
  754,616
  793,663
  834,593
  877,502
  922,493
Fixed operating expenses, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total operating expenses, $m
  171,910
  184,771
  198,146
  212,045
  226,489
  241,504
  257,115
  273,354
  290,253
  307,846
  326,170
  340,509
  360,419
  381,188
  402,864
  425,496
  449,136
  473,840
  499,665
  526,673
  554,928
  584,496
  615,448
  647,856
  681,799
  717,358
  754,616
  793,663
  834,593
  877,502
  922,493
Operating income, $m
  12,930
  14,301
  15,718
  17,189
  18,719
  20,308
  21,961
  23,681
  25,470
  27,333
  29,273
  36,053
  38,161
  40,361
  42,656
  45,052
  47,555
  50,170
  52,905
  55,765
  58,756
  61,887
  65,164
  68,595
  72,189
  75,954
  79,899
  84,034
  88,367
  92,911
  97,674
EBITDA, $m
  14,985
  19,573
  21,027
  22,538
  24,109
  25,742
  27,439
  29,205
  31,042
  32,955
  34,947
  37,024
  39,189
  41,447
  43,804
  46,265
  48,835
  51,521
  54,329
  57,266
  60,338
  63,553
  66,918
  70,442
  74,133
  77,999
  82,050
  86,296
  90,746
  95,412
  100,303
Interest expense (income), $m
  1,055
  1,154
  1,380
  1,617
  1,863
  2,119
  2,384
  2,660
  2,948
  3,247
  3,558
  3,882
  4,220
  4,572
  4,940
  5,324
  5,724
  6,142
  6,579
  7,036
  7,514
  8,014
  8,537
  9,085
  9,658
  10,259
  10,888
  11,547
  12,238
  12,963
  13,722
Earnings before tax, $m
  11,863
  13,148
  14,337
  15,572
  16,856
  18,190
  19,577
  21,020
  22,522
  24,086
  25,715
  32,171
  33,941
  35,788
  37,716
  39,728
  41,831
  44,028
  46,326
  48,728
  51,242
  53,873
  56,627
  59,511
  62,531
  65,695
  69,011
  72,486
  76,129
  79,948
  83,952
Tax expense, $m
  4,790
  3,550
  3,871
  4,205
  4,551
  4,911
  5,286
  5,675
  6,081
  6,503
  6,943
  8,686
  9,164
  9,663
  10,183
  10,727
  11,294
  11,888
  12,508
  13,157
  13,835
  14,546
  15,289
  16,068
  16,883
  17,738
  18,633
  19,571
  20,555
  21,586
  22,667
Net income, $m
  7,017
  9,598
  10,466
  11,368
  12,305
  13,279
  14,291
  15,345
  16,441
  17,583
  18,772
  23,485
  24,777
  26,125
  27,532
  29,002
  30,537
  32,141
  33,818
  35,572
  37,407
  39,327
  41,338
  43,443
  45,648
  47,958
  50,378
  52,915
  55,574
  58,362
  61,285

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  122,810
  132,274
  142,102
  152,315
  162,929
  173,962
  185,433
  197,366
  209,783
  222,710
  236,175
  250,207
  264,838
  280,099
  296,026
  312,656
  330,027
  348,179
  367,156
  387,002
  407,764
  429,490
  452,234
  476,048
  500,989
  527,118
  554,495
  583,187
  613,262
  644,792
  677,852
Adjusted assets (=assets-cash), $m
  122,810
  132,274
  142,102
  152,315
  162,929
  173,962
  185,433
  197,366
  209,783
  222,710
  236,175
  250,207
  264,838
  280,099
  296,026
  312,656
  330,027
  348,179
  367,156
  387,002
  407,764
  429,490
  452,234
  476,048
  500,989
  527,118
  554,495
  583,187
  613,262
  644,792
  677,852
Revenue / Adjusted assets
  0.000
  1.505
  1.505
  1.505
  1.505
  1.505
  1.505
  1.505
  1.505
  1.505
  1.505
  1.505
  1.505
  1.505
  1.505
  1.505
  1.505
  1.505
  1.505
  1.505
  1.505
  1.505
  1.505
  1.505
  1.505
  1.505
  1.505
  1.505
  1.505
  1.505
  1.505
Average production assets, $m
  13,847
  14,930
  16,040
  17,193
  18,391
  19,636
  20,931
  22,278
  23,679
  25,138
  26,658
  28,242
  29,894
  31,616
  33,414
  35,291
  37,252
  39,301
  41,443
  43,683
  46,026
  48,479
  51,046
  53,734
  56,549
  59,498
  62,589
  65,827
  69,222
  72,781
  76,513
Working capital, $m
  0
  7,764
  8,341
  8,940
  9,563
  10,211
  10,884
  11,584
  12,313
  13,072
  13,862
  14,686
  15,545
  16,440
  17,375
  18,351
  19,371
  20,436
  21,550
  22,715
  23,934
  25,209
  26,544
  27,942
  29,406
  30,939
  32,546
  34,230
  35,995
  37,846
  39,787
Total debt, $m
  32,970
  39,439
  46,200
  53,227
  60,529
  68,120
  76,012
  84,221
  92,764
  101,658
  110,922
  120,577
  130,642
  141,142
  152,100
  163,541
  175,493
  187,981
  201,037
  214,691
  228,975
  243,923
  259,571
  275,955
  293,115
  311,091
  329,927
  349,667
  370,359
  392,051
  414,796
Total liabilities, $m
  84,536
  91,005
  97,766
  104,793
  112,095
  119,686
  127,578
  135,787
  144,330
  153,224
  162,488
  172,143
  182,208
  192,708
  203,666
  215,107
  227,059
  239,547
  252,603
  266,257
  280,541
  295,489
  311,137
  327,521
  344,681
  362,657
  381,493
  401,233
  421,925
  443,617
  466,362
Total equity, $m
  38,274
  41,270
  44,336
  47,522
  50,834
  54,276
  57,855
  61,578
  65,452
  69,485
  73,687
  78,065
  82,629
  87,391
  92,360
  97,549
  102,968
  108,632
  114,553
  120,745
  127,222
  134,001
  141,097
  148,527
  156,309
  164,461
  173,003
  181,954
  191,338
  201,175
  211,490
Total liabilities and equity, $m
  122,810
  132,275
  142,102
  152,315
  162,929
  173,962
  185,433
  197,365
  209,782
  222,709
  236,175
  250,208
  264,837
  280,099
  296,026
  312,656
  330,027
  348,179
  367,156
  387,002
  407,763
  429,490
  452,234
  476,048
  500,990
  527,118
  554,496
  583,187
  613,263
  644,792
  677,852
Debt-to-equity ratio
  0.861
  0.960
  1.040
  1.120
  1.190
  1.260
  1.310
  1.370
  1.420
  1.460
  1.510
  1.540
  1.580
  1.620
  1.650
  1.680
  1.700
  1.730
  1.750
  1.780
  1.800
  1.820
  1.840
  1.860
  1.880
  1.890
  1.910
  1.920
  1.940
  1.950
  1.960
Adjusted equity ratio
  0.312
  0.312
  0.312
  0.312
  0.312
  0.312
  0.312
  0.312
  0.312
  0.312
  0.312
  0.312
  0.312
  0.312
  0.312
  0.312
  0.312
  0.312
  0.312
  0.312
  0.312
  0.312
  0.312
  0.312
  0.312
  0.312
  0.312
  0.312
  0.312
  0.312
  0.312

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  7,017
  9,598
  10,466
  11,368
  12,305
  13,279
  14,291
  15,345
  16,441
  17,583
  18,772
  23,485
  24,777
  26,125
  27,532
  29,002
  30,537
  32,141
  33,818
  35,572
  37,407
  39,327
  41,338
  43,443
  45,648
  47,958
  50,378
  52,915
  55,574
  58,362
  61,285
Depreciation, amort., depletion, $m
  2,055
  5,271
  5,310
  5,349
  5,390
  5,433
  5,478
  5,524
  5,572
  5,622
  5,674
  971
  1,027
  1,086
  1,148
  1,213
  1,280
  1,351
  1,424
  1,501
  1,582
  1,666
  1,754
  1,847
  1,943
  2,045
  2,151
  2,262
  2,379
  2,501
  2,629
Funds from operations, $m
  9,978
  14,869
  15,776
  16,717
  17,695
  18,712
  19,769
  20,869
  22,013
  23,205
  24,446
  24,455
  25,804
  27,212
  28,681
  30,214
  31,817
  33,491
  35,242
  37,073
  38,988
  40,993
  43,092
  45,289
  47,591
  50,002
  52,529
  55,177
  57,953
  60,863
  63,915
Change in working capital, $m
  183
  555
  577
  599
  623
  648
  673
  700
  729
  759
  790
  824
  859
  896
  935
  976
  1,020
  1,065
  1,114
  1,165
  1,219
  1,275
  1,335
  1,398
  1,464
  1,534
  1,607
  1,684
  1,765
  1,851
  1,940
Cash from operations, $m
  9,795
  14,314
  15,199
  16,117
  17,072
  18,064
  19,096
  20,168
  21,285
  22,446
  23,656
  23,632
  24,946
  26,316
  27,746
  29,238
  30,797
  32,426
  34,128
  35,908
  37,770
  39,718
  41,757
  43,891
  46,127
  48,469
  50,922
  53,493
  56,188
  59,012
  61,974
Maintenance CAPEX, $m
  0
  -476
  -513
  -551
  -591
  -632
  -675
  -719
  -766
  -814
  -864
  -916
  -971
  -1,027
  -1,086
  -1,148
  -1,213
  -1,280
  -1,351
  -1,424
  -1,501
  -1,582
  -1,666
  -1,754
  -1,847
  -1,943
  -2,045
  -2,151
  -2,262
  -2,379
  -2,501
New CAPEX, $m
  -1,705
  -1,083
  -1,109
  -1,153
  -1,198
  -1,245
  -1,295
  -1,347
  -1,402
  -1,459
  -1,520
  -1,584
  -1,651
  -1,723
  -1,798
  -1,877
  -1,961
  -2,049
  -2,142
  -2,240
  -2,343
  -2,452
  -2,567
  -2,688
  -2,815
  -2,949
  -3,090
  -3,239
  -3,395
  -3,559
  -3,732
Cash from investing activities, $m
  -9,355
  -1,559
  -1,622
  -1,704
  -1,789
  -1,877
  -1,970
  -2,066
  -2,168
  -2,273
  -2,384
  -2,500
  -2,622
  -2,750
  -2,884
  -3,025
  -3,174
  -3,329
  -3,493
  -3,664
  -3,844
  -4,034
  -4,233
  -4,442
  -4,662
  -4,892
  -5,135
  -5,390
  -5,657
  -5,938
  -6,233
Free cash flow, $m
  440
  12,755
  13,577
  14,414
  15,283
  16,187
  17,126
  18,102
  19,117
  20,173
  21,272
  21,132
  22,324
  23,566
  24,861
  26,213
  27,624
  29,097
  30,635
  32,244
  33,925
  35,684
  37,524
  39,449
  41,465
  43,576
  45,787
  48,104
  50,531
  53,075
  55,741
Issuance/(repayment) of debt, $m
  990
  6,469
  6,762
  7,026
  7,302
  7,590
  7,892
  8,210
  8,543
  8,894
  9,264
  9,654
  10,066
  10,500
  10,958
  11,441
  11,951
  12,489
  13,056
  13,654
  14,284
  14,948
  15,647
  16,384
  17,160
  17,976
  18,836
  19,740
  20,692
  21,692
  22,745
Issuance/(repurchase) of shares, $m
  -851
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  1,250
  6,469
  6,762
  7,026
  7,302
  7,590
  7,892
  8,210
  8,543
  8,894
  9,264
  9,654
  10,066
  10,500
  10,958
  11,441
  11,951
  12,489
  13,056
  13,654
  14,284
  14,948
  15,647
  16,384
  17,160
  17,976
  18,836
  19,740
  20,692
  21,692
  22,745
Total cash flow (excl. dividends), $m
  1,768
  19,223
  20,338
  21,440
  22,585
  23,777
  25,018
  26,312
  27,660
  29,067
  30,536
  30,786
  32,389
  34,066
  35,819
  37,654
  39,575
  41,586
  43,691
  45,898
  48,209
  50,632
  53,171
  55,833
  58,625
  61,552
  64,623
  67,844
  71,222
  74,767
  78,486
Retained Cash Flow (-), $m
  -4,444
  -2,996
  -3,066
  -3,186
  -3,311
  -3,442
  -3,579
  -3,723
  -3,874
  -4,033
  -4,201
  -4,378
  -4,565
  -4,762
  -4,969
  -5,188
  -5,420
  -5,664
  -5,921
  -6,192
  -6,478
  -6,779
  -7,096
  -7,430
  -7,782
  -8,152
  -8,542
  -8,952
  -9,383
  -9,837
  -10,315
Prev. year cash balance distribution, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  16,228
  17,272
  18,254
  19,274
  20,335
  21,439
  22,589
  23,786
  25,034
  26,335
  26,408
  27,825
  29,304
  30,850
  32,466
  34,155
  35,922
  37,771
  39,706
  41,731
  43,853
  46,075
  48,403
  50,843
  53,400
  56,081
  58,892
  61,839
  64,930
  68,172
Discount rate, %
 
  7.00
  7.35
  7.72
  8.10
  8.51
  8.93
  9.38
  9.85
  10.34
  10.86
  11.40
  11.97
  12.57
  13.20
  13.86
  14.55
  15.28
  16.04
  16.85
  17.69
  18.57
  19.50
  20.48
  21.50
  22.58
  23.70
  24.89
  26.13
  27.44
  28.81
PV of cash for distribution, $m
 
  15,166
  14,988
  14,605
  14,113
  13,519
  12,830
  12,059
  11,218
  10,324
  9,393
  8,052
  7,163
  6,286
  5,438
  4,633
  3,885
  3,203
  2,594
  2,061
  1,606
  1,225
  915
  667
  475
  329
  222
  146
  93
  57
  34
Current shareholders' claim on cash, %
  100
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

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.

FINANCIAL RATIOS  of  UnitedHealth Group (UNH)

Valuation Ratios
P/E Ratio 26.2
Price to Sales 1
Price to Book 4.8
Price to Tangible Book
Price to Cash Flow 18.8
Price to Free Cash Flow 22.7
Growth Rates
Sales Growth Rate 17.7%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 9.6%
Cap. Spend. - 3 Yr. Gr. Rate 5.5%
Financial Strength
Quick Ratio 0
Current Ratio NaN
LT Debt to Equity 67.3%
Total Debt to Equity 86.1%
Interest Coverage 12
Management Effectiveness
Return On Assets 6.5%
Ret/ On Assets - 3 Yr. Avg. 6.6%
Return On Total Capital 10.2%
Ret/ On T. Cap. - 3 Yr. Avg. 10.6%
Return On Equity 19.5%
Return On Equity - 3 Yr. Avg. 18.1%
Asset Turnover 1.6
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 0%
EBITDA Margin 8.1%
EBITDA Margin - 3 Yr. Avg. 8.4%
Operating Margin 7%
Oper. Margin - 3 Yr. Avg. 7.3%
Pre-Tax Margin 6.4%
Pre-Tax Margin - 3 Yr. Avg. 6.8%
Net Profit Margin 3.8%
Net Profit Margin - 3 Yr. Avg. 3.9%
Effective Tax Rate 40.4%
Eff/ Tax Rate - 3 Yr. Avg. 41.6%
Payout Ratio 32.2%

UNH stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the UNH stock intrinsic value calculation we used $184840 million for the last fiscal year's total revenue generated by UnitedHealth Group. The default revenue input number comes from 2016 income statement of UnitedHealth Group. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our UNH stock valuation model: a) initial revenue growth rate of 7.7% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 7%, whose default value for UNH is calculated based on our internal credit rating of UnitedHealth Group, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of UnitedHealth Group.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of UNH stock the variable cost ratio is equal to 93%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for UNH stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 3.5% for UnitedHealth Group.

Corporate tax rate of 27% is the nominal tax rate for UnitedHealth Group. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the UNH stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for UNH are equal to 7.5%.

Life of production assets of 29.1 years is the average useful life of capital assets used in UnitedHealth Group operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for UNH is equal to 3.9%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $38274 million for UnitedHealth Group - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 964.91 million for UnitedHealth Group is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of UnitedHealth Group at the current share price and the inputted number of shares is $186.4 billion.

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COMPANY NEWS

▶ [$$] UnitedHealth Profit Rises Despite ACA-Related Costs   [07:17AM  The Wall Street Journal]
▶ UnitedHealth beats 3Q profit forecasts   [06:00AM  Associated Press]
▶ UnitedHealth Group Third Quarter Highlights   [05:55AM  Business Wire]
▶ Cramer looks at pivotal earnings week   [Oct-13-17 06:47PM  CNBC Videos]
▶ Disney, Verizon Sink DJIA Thursday   [04:01PM  24/7 Wall St.]
▶ UnitedHealth plans to sell employer coverage in Minnesota   [Oct-10-17 09:40AM  American City Business Journals]
▶ General Electric, Nike Sink DJIA on Monday   [Oct-09-17 04:01PM  24/7 Wall St.]
▶ Nike, Caterpillar Underpin DJIA on Wednesday   [Oct-04-17 04:01PM  24/7 Wall St.]
▶ Exact Sciences: GoingUp!   [Oct-03-17 03:44PM  Barrons.com]
▶ 7 Dividend Powerhouses That Beat The S&P   [02:30PM  Investopedia]
▶ Spiros Segalas Picks Up 5 New Stocks in 3rd Quarter   [Oct-02-17 02:00PM  GuruFocus.com]
▶ Could Tax Reform Boost the Healthcare Sector?   [08:28AM  Market Realist]
▶ McDonalds, Exxon Mobil Prop Up DJIA on Thursday   [Sep-28-17 04:01PM  24/7 Wall St.]
▶ Stocks With Rising Relative Strength: Molina Healthcare   [Sep-27-17 03:00AM  Investor's Business Daily]
▶ Apple, American Express Buoy DJIA on Tuesday   [04:01PM  24/7 Wall St.]
▶ Could This Be Warren Buffett's Greatest Weakness?   [Sep-24-17 09:18AM  Motley Fool]
▶ Markets Right Now: Stocks end mostly higher   [Sep-22-17 04:14PM  Associated Press]
▶ Apple, UnitedHealth Weigh on DJIA Friday   [04:01PM  24/7 Wall St.]
▶ Healthcare Reform: Who Suffers?   [04:26PM  Barrons.com]
Financial statements of UNH
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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