Intrinsic value of UnitedHealth Group - UNH

Previous Close

$263.10

  Intrinsic Value

$401.67

stock screener

  Rating & Target

str. buy

+53%

Previous close

$263.10

 
Intrinsic value

$401.67

 
Up/down potential

+53%

 
Rating

str. buy

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 2017), $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 253.6

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   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
   2047

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  8.80
  8.42
  8.08
  7.77
  7.49
  7.24
  7.02
  6.82
  6.64
  6.47
  6.32
  6.19
  6.07
  5.97
  5.87
  5.78
  5.70
  5.63
  5.57
  5.51
  5.46
  5.42
  5.37
  5.34
  5.30
  5.27
  5.25
  5.22
  5.20
  5.18
Revenue, $m
  218,861
  237,289
  256,457
  276,385
  297,095
  318,616
  340,981
  364,227
  388,397
  413,534
  439,690
  466,918
  495,275
  524,823
  555,626
  587,755
  621,281
  656,282
  692,840
  731,038
  770,967
  812,721
  856,399
  902,103
  949,943
  1,000,031
  1,052,488
  1,107,438
  1,165,012
  1,225,348
Variable operating expenses, $m
  187,666
  202,936
  218,820
  235,333
  252,495
  270,328
  288,861
  308,125
  328,153
  348,984
  364,353
  386,916
  410,414
  434,899
  460,425
  487,048
  514,830
  543,834
  574,128
  605,781
  638,869
  673,469
  709,663
  747,536
  787,179
  828,685
  872,154
  917,689
  965,398
  1,015,396
Fixed operating expenses, $m
  13,481
  13,778
  14,081
  14,391
  14,707
  15,031
  15,362
  15,699
  16,045
  16,398
  16,759
  17,127
  17,504
  17,889
  18,283
  18,685
  19,096
  19,516
  19,945
  20,384
  20,833
  21,291
  21,759
  22,238
  22,727
  23,227
  23,738
  24,261
  24,794
  25,340
Total operating expenses, $m
  201,147
  216,714
  232,901
  249,724
  267,202
  285,359
  304,223
  323,824
  344,198
  365,382
  381,112
  404,043
  427,918
  452,788
  478,708
  505,733
  533,926
  563,350
  594,073
  626,165
  659,702
  694,760
  731,422
  769,774
  809,906
  851,912
  895,892
  941,950
  990,192
  1,040,736
Operating income, $m
  17,714
  20,575
  23,556
  26,661
  29,893
  33,257
  36,758
  40,403
  44,199
  48,153
  58,578
  62,875
  67,357
  72,034
  76,919
  82,021
  87,355
  92,932
  98,766
  104,872
  111,265
  117,961
  124,977
  132,329
  140,037
  148,119
  156,596
  165,489
  174,820
  184,612
EBITDA, $m
  31,197
  34,663
  38,273
  42,031
  45,942
  50,012
  54,247
  58,654
  63,243
  68,021
  73,000
  78,190
  83,602
  89,249
  95,143
  101,300
  107,733
  114,458
  121,491
  128,850
  136,553
  144,619
  153,067
  161,918
  171,195
  180,920
  191,117
  201,813
  213,032
  224,804
Interest expense (income), $m
  1,055
  1,711
  2,140
  2,591
  3,060
  3,548
  4,055
  4,582
  5,130
  5,699
  6,290
  6,906
  7,546
  8,213
  8,907
  9,630
  10,384
  11,171
  11,992
  12,849
  13,744
  14,679
  15,656
  16,678
  17,748
  18,867
  20,038
  21,264
  22,548
  23,893
  25,303
Earnings before tax, $m
  16,003
  18,435
  20,965
  23,600
  26,344
  29,201
  32,176
  35,273
  38,500
  41,863
  51,672
  55,329
  59,144
  63,127
  67,288
  71,637
  76,184
  80,940
  85,918
  91,129
  96,587
  102,305
  108,298
  114,581
  121,170
  128,081
  135,332
  142,941
  150,927
  159,310
Tax expense, $m
  4,321
  4,977
  5,661
  6,372
  7,113
  7,884
  8,687
  9,524
  10,395
  11,303
  13,952
  14,939
  15,969
  17,044
  18,168
  19,342
  20,570
  21,854
  23,198
  24,605
  26,078
  27,622
  29,241
  30,937
  32,716
  34,582
  36,540
  38,594
  40,750
  43,014
Net income, $m
  11,682
  13,458
  15,304
  17,228
  19,231
  21,317
  23,488
  25,750
  28,105
  30,560
  37,721
  40,390
  43,175
  46,083
  49,121
  52,295
  55,614
  59,086
  62,720
  66,524
  70,508
  74,683
  79,058
  83,644
  88,454
  93,499
  98,792
  104,347
  110,176
  116,296

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
Total assets, $m
  151,252
  163,987
  177,234
  191,005
  205,318
  220,191
  235,647
  251,712
  268,415
  285,787
  303,863
  322,680
  342,277
  362,697
  383,985
  406,188
  429,358
  453,547
  478,811
  505,210
  532,804
  561,660
  591,844
  623,430
  656,491
  691,107
  727,359
  765,334
  805,123
  846,820
Adjusted assets (=assets-cash), $m
  151,252
  163,987
  177,234
  191,005
  205,318
  220,191
  235,647
  251,712
  268,415
  285,787
  303,863
  322,680
  342,277
  362,697
  383,985
  406,188
  429,358
  453,547
  478,811
  505,210
  532,804
  561,660
  591,844
  623,430
  656,491
  691,107
  727,359
  765,334
  805,123
  846,820
Revenue / Adjusted assets
  1.447
  1.447
  1.447
  1.447
  1.447
  1.447
  1.447
  1.447
  1.447
  1.447
  1.447
  1.447
  1.447
  1.447
  1.447
  1.447
  1.447
  1.447
  1.447
  1.447
  1.447
  1.447
  1.447
  1.447
  1.447
  1.447
  1.447
  1.447
  1.447
  1.447
Average production assets, $m
  71,786
  77,831
  84,118
  90,654
  97,447
  104,506
  111,842
  119,467
  127,394
  135,639
  144,218
  153,149
  162,450
  172,142
  182,245
  192,784
  203,780
  215,261
  227,251
  239,781
  252,877
  266,573
  280,899
  295,890
  311,581
  328,010
  345,216
  363,240
  382,124
  401,914
Working capital, $m
  -35,893
  -38,915
  -42,059
  -45,327
  -48,724
  -52,253
  -55,921
  -59,733
  -63,697
  -67,820
  -72,109
  -76,575
  -81,225
  -86,071
  -91,123
  -96,392
  -101,890
  -107,630
  -113,626
  -119,890
  -126,439
  -133,286
  -140,449
  -147,945
  -155,791
  -164,005
  -172,608
  -181,620
  -191,062
  -200,957
Total debt, $m
  39,631
  47,985
  56,675
  65,709
  75,098
  84,855
  94,994
  105,533
  116,490
  127,887
  139,744
  152,088
  164,944
  178,339
  192,304
  206,870
  222,069
  237,937
  254,510
  271,827
  289,929
  308,859
  328,660
  349,380
  371,068
  393,776
  417,557
  442,469
  468,570
  495,924
Total liabilities, $m
  99,221
  107,575
  116,265
  125,299
  134,688
  144,445
  154,584
  165,123
  176,080
  187,477
  199,334
  211,678
  224,534
  237,929
  251,894
  266,460
  281,659
  297,527
  314,100
  331,417
  349,519
  368,449
  388,250
  408,970
  430,658
  453,366
  477,147
  502,059
  528,160
  555,514
Total equity, $m
  52,031
  56,412
  60,968
  65,706
  70,629
  75,746
  81,062
  86,589
  92,335
  98,311
  104,529
  111,002
  117,743
  124,768
  132,091
  139,729
  147,699
  156,020
  164,711
  173,792
  183,285
  193,211
  203,594
  214,460
  225,833
  237,741
  250,211
  263,275
  276,962
  291,306
Total liabilities and equity, $m
  151,252
  163,987
  177,233
  191,005
  205,317
  220,191
  235,646
  251,712
  268,415
  285,788
  303,863
  322,680
  342,277
  362,697
  383,985
  406,189
  429,358
  453,547
  478,811
  505,209
  532,804
  561,660
  591,844
  623,430
  656,491
  691,107
  727,358
  765,334
  805,122
  846,820
Debt-to-equity ratio
  0.760
  0.850
  0.930
  1.000
  1.060
  1.120
  1.170
  1.220
  1.260
  1.300
  1.340
  1.370
  1.400
  1.430
  1.460
  1.480
  1.500
  1.530
  1.550
  1.560
  1.580
  1.600
  1.610
  1.630
  1.640
  1.660
  1.670
  1.680
  1.690
  1.700
Adjusted equity ratio
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  11,682
  13,458
  15,304
  17,228
  19,231
  21,317
  23,488
  25,750
  28,105
  30,560
  37,721
  40,390
  43,175
  46,083
  49,121
  52,295
  55,614
  59,086
  62,720
  66,524
  70,508
  74,683
  79,058
  83,644
  88,454
  93,499
  98,792
  104,347
  110,176
  116,296
Depreciation, amort., depletion, $m
  13,483
  14,088
  14,716
  15,370
  16,049
  16,755
  17,489
  18,251
  19,044
  19,868
  14,422
  15,315
  16,245
  17,214
  18,225
  19,278
  20,378
  21,526
  22,725
  23,978
  25,288
  26,657
  28,090
  29,589
  31,158
  32,801
  34,522
  36,324
  38,212
  40,191
Funds from operations, $m
  25,165
  27,545
  30,021
  32,598
  35,281
  38,072
  40,977
  44,001
  47,149
  50,428
  52,143
  55,705
  59,420
  63,297
  67,345
  71,573
  75,992
  80,612
  85,445
  90,502
  95,796
  101,340
  107,148
  113,233
  119,612
  126,300
  133,314
  140,671
  148,389
  156,487
Change in working capital, $m
  -2,903
  -3,022
  -3,144
  -3,268
  -3,396
  -3,529
  -3,668
  -3,812
  -3,964
  -4,123
  -4,290
  -4,465
  -4,651
  -4,846
  -5,052
  -5,269
  -5,498
  -5,740
  -5,995
  -6,265
  -6,548
  -6,848
  -7,163
  -7,495
  -7,846
  -8,215
  -8,603
  -9,012
  -9,442
  -9,895
Cash from operations, $m
  28,068
  30,567
  33,164
  35,866
  38,677
  41,601
  44,645
  47,813
  51,113
  54,551
  56,432
  60,170
  64,071
  68,143
  72,397
  76,842
  81,491
  86,353
  91,440
  96,767
  102,345
  108,188
  114,311
  120,729
  127,458
  134,515
  141,917
  149,682
  157,831
  166,382
Maintenance CAPEX, $m
  -6,604
  -7,179
  -7,783
  -8,412
  -9,065
  -9,745
  -10,451
  -11,184
  -11,947
  -12,739
  -13,564
  -14,422
  -15,315
  -16,245
  -17,214
  -18,225
  -19,278
  -20,378
  -21,526
  -22,725
  -23,978
  -25,288
  -26,657
  -28,090
  -29,589
  -31,158
  -32,801
  -34,522
  -36,324
  -38,212
New CAPEX, $m
  -5,744
  -6,044
  -6,287
  -6,536
  -6,793
  -7,059
  -7,336
  -7,625
  -7,928
  -8,245
  -8,579
  -8,931
  -9,301
  -9,692
  -10,104
  -10,538
  -10,997
  -11,480
  -11,991
  -12,529
  -13,097
  -13,695
  -14,326
  -14,991
  -15,691
  -16,429
  -17,206
  -18,024
  -18,884
  -19,790
Cash from investing activities, $m
  -12,348
  -13,223
  -14,070
  -14,948
  -15,858
  -16,804
  -17,787
  -18,809
  -19,875
  -20,984
  -22,143
  -23,353
  -24,616
  -25,937
  -27,318
  -28,763
  -30,275
  -31,858
  -33,517
  -35,254
  -37,075
  -38,983
  -40,983
  -43,081
  -45,280
  -47,587
  -50,007
  -52,546
  -55,208
  -58,002
Free cash flow, $m
  15,720
  17,344
  19,094
  20,918
  22,819
  24,798
  26,859
  29,004
  31,239
  33,566
  34,289
  36,818
  39,455
  42,206
  45,079
  48,080
  51,216
  54,494
  57,924
  61,512
  65,270
  69,205
  73,327
  77,648
  82,178
  86,928
  91,910
  97,137
  102,623
  108,380
Issuance/(repayment) of debt, $m
  7,939
  8,354
  8,690
  9,034
  9,389
  9,757
  10,139
  10,539
  10,957
  11,396
  11,858
  12,344
  12,856
  13,395
  13,965
  14,565
  15,199
  15,868
  16,573
  17,317
  18,102
  18,929
  19,801
  20,720
  21,688
  22,708
  23,781
  24,912
  26,101
  27,353
Issuance/(repurchase) of shares, $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 from financing (excl. dividends), $m  
  7,939
  8,354
  8,690
  9,034
  9,389
  9,757
  10,139
  10,539
  10,957
  11,396
  11,858
  12,344
  12,856
  13,395
  13,965
  14,565
  15,199
  15,868
  16,573
  17,317
  18,102
  18,929
  19,801
  20,720
  21,688
  22,708
  23,781
  24,912
  26,101
  27,353
Total cash flow (excl. dividends), $m
  23,659
  25,699
  27,784
  29,952
  32,208
  34,554
  36,998
  39,543
  42,196
  44,962
  46,147
  49,161
  52,310
  55,602
  59,044
  62,645
  66,415
  70,362
  74,497
  78,830
  83,372
  88,134
  93,128
  98,368
  103,866
  109,635
  115,691
  122,049
  128,724
  135,733
Retained Cash Flow (-), $m
  -4,255
  -4,381
  -4,557
  -4,737
  -4,923
  -5,116
  -5,317
  -5,526
  -5,746
  -5,976
  -6,218
  -6,473
  -6,741
  -7,024
  -7,323
  -7,638
  -7,970
  -8,321
  -8,691
  -9,081
  -9,493
  -9,926
  -10,384
  -10,865
  -11,373
  -11,908
  -12,471
  -13,063
  -13,687
  -14,344
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
  603
  657
  712
  769
  829
  891
  956
  1,023
  1,093
  1,165
  1,241
  1,319
  1,401
  1,486
  1,574
  1,667
  1,763
  1,864
  1,969
  2,079
  2,193
  2,313
  2,438
  2,569
  2,706
  2,850
  3,000
  3,157
  3,322
  3,495
Cash available for distribution, $m
  19,404
  21,318
  23,227
  25,215
  27,284
  29,438
  31,681
  34,016
  36,450
  38,986
  39,929
  42,688
  45,569
  48,577
  51,721
  55,007
  58,444
  62,041
  65,806
  69,749
  73,879
  78,208
  82,745
  87,503
  92,493
  97,728
  103,221
  108,985
  115,037
  121,389
Discount rate, %
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
  18,604
  19,516
  20,214
  20,762
  21,149
  21,364
  21,403
  21,261
  20,939
  20,439
  18,962
  18,217
  17,326
  16,308
  15,184
  13,979
  12,717
  11,425
  10,132
  8,863
  7,642
  6,489
  5,423
  4,457
  3,598
  2,851
  2,215
  1,686
  1,256
  914
Current shareholders' claim on cash, %
  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 35.7
Price to Sales 1.4
Price to Book 6.5
Price to Tangible Book
Price to Cash Flow 25.6
Price to Free Cash Flow 31
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 $201159 million for the last fiscal year's total revenue generated by UnitedHealth Group. The default revenue input number comes from 2017 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 8.8% 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 4.3%, 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 86%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $13191 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 5.4% 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 0.3%.

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 32.8%.

Life of production assets of 10 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 -16.4%. 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 - $47776 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 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 $253.6 billion.

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COMPANY NEWS

▶ Pronovost leaves UnitedHealthcare weeks after being named chief medical officer   [Aug-14-18 03:30PM  American City Business Journals]
▶ UnitedHealth in talks to buy pharmacy chain Genoa: report   [08:09AM  American City Business Journals]
▶ Which Stocks Are The Best Mutual Funds Buying? Here's The Latest List   [Aug-07-18 04:05PM  Investor's Business Daily]
▶ 3 Healthcare Stocks to Buy for the Sector Rebound   [Aug-06-18 03:00PM  InvestorPlace]
▶ Health Insurance Carriers Headed for New Highs   [Aug-03-18 09:35AM  Investopedia]
▶ Health Insurers Fly As Trump Takes New Ax To ObamaCare   [Aug-01-18 04:22PM  Investor's Business Daily]
▶ 5 Retirement Stocks to Buy and Hold   [10:39AM  InvestorPlace]
▶ Healthcare ETF (IHF) Hits New 52-Week High   [Jul-24-18 08:30AM  Zacks]
▶ Group protests state's KanCare RFP process   [Jul-23-18 03:57PM  American City Business Journals]
▶ 5 Vanguard Funds to Beat the S&P 500   [10:26AM  InvestorPlace]
▶ Amazon fuels T. Rowe Price U.S. mutual funds past the S&P 500   [08:57AM  American City Business Journals]
▶ Top 3 Healthcare Stocks for 2018   [Jul-22-18 11:55PM  Investopedia]
▶ MARKETS: Honeywell stock pops after raising full year guidance   [Jul-20-18 11:16AM  Yahoo Finance Video]
▶ Here's What UnitedHealth Investors Should Be Watching   [Jul-19-18 04:14PM  Motley Fool]
▶ Company News For Jul 18, 2018   [09:56AM  Zacks]
▶ The 5 Best Dow Stocks of 2018 (So Far)   [08:23AM  Motley Fool]
▶ [$$] UnitedHealth Raises Profit Outlook   [Jul-17-18 08:12PM  The Wall Street Journal]
▶ UnitedHealth's Business Continues to Grow   [03:00PM  Motley Fool]
▶ A Full Scale Dow Component Blitz   [01:34PM  CNBC Videos]
▶ [$$] UnitedHealth Raises Profit Outlook   [11:24AM  The Wall Street Journal]
▶ Watch Out For Goldman   [10:24AM  Zacks]
▶ How UnitedHealth Group Makes its Money   [10:18AM  Investopedia]
▶ UnitedHealth Group's Earnings Preview   [Jul-16-18 05:31PM  Benzinga]
▶ UnitedHealthcare awards $2 million to Arizona nonprofits   [04:50PM  American City Business Journals]
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