Intrinsic value of UnitedHealth Group - UNH

Previous Close

$222.77

  Intrinsic Value

$193.22

stock screener

  Rating & Target

hold

-13%

Previous close

$222.77

 
Intrinsic value

$193.22

 
Up/down potential

-13%

 
Rating

hold

*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 215.4

 

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
  8.70
  8.33
  8.00
  7.70
  7.43
  7.18
  6.97
  6.77
  6.59
  6.43
  6.29
  6.16
  6.04
  5.94
  5.85
  5.76
  5.69
  5.62
  5.56
  5.50
  5.45
  5.40
  5.36
  5.33
  5.30
  5.27
  5.24
  5.22
  5.19
  5.17
Revenue, $m
  0
  200,921
  217,658
  235,064
  253,157
  271,961
  291,501
  311,808
  332,916
  354,864
  377,694
  401,452
  426,186
  451,949
  478,797
  506,789
  535,989
  566,464
  598,282
  631,519
  666,251
  702,561
  740,533
  780,258
  821,830
  865,347
  910,912
  958,636
  1,008,630
  1,061,015
  1,115,914
Variable operating expenses, $m
 
  186,443
  201,577
  217,316
  233,678
  250,681
  268,350
  286,713
  305,800
  325,647
  346,291
  363,016
  385,381
  408,678
  432,955
  458,267
  484,672
  512,228
  541,001
  571,055
  602,462
  635,295
  669,632
  705,554
  743,145
  782,495
  823,699
  866,853
  912,060
  959,430
  1,009,073
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
  186,443
  201,577
  217,316
  233,678
  250,681
  268,350
  286,713
  305,800
  325,647
  346,291
  363,016
  385,381
  408,678
  432,955
  458,267
  484,672
  512,228
  541,001
  571,055
  602,462
  635,295
  669,632
  705,554
  743,145
  782,495
  823,699
  866,853
  912,060
  959,430
  1,009,073
Operating income, $m
  12,930
  14,478
  16,081
  17,747
  19,480
  21,280
  23,151
  25,095
  27,116
  29,218
  31,403
  38,436
  40,804
  43,271
  45,842
  48,522
  51,317
  54,235
  57,282
  60,464
  63,789
  67,266
  70,901
  74,705
  78,685
  82,851
  87,214
  91,783
  96,570
  101,585
  106,841
EBITDA, $m
  14,985
  19,755
  21,400
  23,112
  24,891
  26,739
  28,661
  30,657
  32,733
  34,891
  37,135
  39,471
  41,903
  44,436
  47,076
  49,828
  52,699
  55,695
  58,823
  62,091
  65,506
  69,076
  72,810
  76,715
  80,803
  85,081
  89,562
  94,254
  99,169
  104,320
  109,717
Interest expense (income), $m
  1,055
  1,154
  1,410
  1,678
  1,956
  2,246
  2,547
  2,859
  3,184
  3,522
  3,873
  4,238
  4,618
  5,014
  5,426
  5,856
  6,304
  6,771
  7,259
  7,768
  8,299
  8,855
  9,436
  10,044
  10,679
  11,344
  12,041
  12,770
  13,533
  14,333
  15,171
Earnings before tax, $m
  11,863
  13,325
  14,671
  16,070
  17,524
  19,034
  20,604
  22,236
  23,932
  25,696
  27,530
  34,198
  36,186
  38,257
  40,415
  42,666
  45,014
  47,464
  50,023
  52,696
  55,490
  58,410
  61,465
  64,661
  68,005
  71,507
  75,173
  79,013
  83,036
  87,252
  91,670
Tax expense, $m
  4,790
  3,598
  3,961
  4,339
  4,731
  5,139
  5,563
  6,004
  6,462
  6,938
  7,433
  9,233
  9,770
  10,329
  10,912
  11,520
  12,154
  12,815
  13,506
  14,228
  14,982
  15,771
  16,596
  17,458
  18,361
  19,307
  20,297
  21,334
  22,420
  23,558
  24,751
Net income, $m
  7,017
  9,727
  10,710
  11,731
  12,792
  13,895
  15,041
  16,232
  17,470
  18,758
  20,097
  24,965
  26,416
  27,928
  29,503
  31,146
  32,860
  34,649
  36,517
  38,468
  40,507
  42,640
  44,869
  47,202
  49,644
  52,200
  54,876
  57,680
  60,616
  63,694
  66,919

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
  133,502
  144,623
  156,189
  168,211
  180,705
  193,688
  207,181
  221,207
  235,790
  250,960
  266,745
  283,180
  300,298
  318,137
  336,737
  356,139
  376,388
  397,530
  419,614
  442,692
  466,818
  492,049
  518,444
  546,066
  574,981
  605,257
  636,967
  670,186
  704,993
  741,471
Adjusted assets (=assets-cash), $m
  122,810
  133,502
  144,623
  156,189
  168,211
  180,705
  193,688
  207,181
  221,207
  235,790
  250,960
  266,745
  283,180
  300,298
  318,137
  336,737
  356,139
  376,388
  397,530
  419,614
  442,692
  466,818
  492,049
  518,444
  546,066
  574,981
  605,257
  636,967
  670,186
  704,993
  741,471
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
  15,069
  16,324
  17,630
  18,987
  20,397
  21,863
  23,386
  24,969
  26,615
  28,327
  30,109
  31,964
  33,896
  35,910
  38,009
  40,199
  42,485
  44,871
  47,364
  49,969
  52,692
  55,540
  58,519
  61,637
  64,901
  68,318
  71,898
  75,647
  79,576
  83,694
Working capital, $m
  0
  7,836
  8,489
  9,167
  9,873
  10,606
  11,369
  12,161
  12,984
  13,840
  14,730
  15,657
  16,621
  17,626
  18,673
  19,765
  20,904
  22,092
  23,333
  24,629
  25,984
  27,400
  28,881
  30,430
  32,051
  33,749
  35,526
  37,387
  39,337
  41,380
  43,521
Total debt, $m
  32,970
  40,284
  47,935
  55,892
  64,163
  72,759
  81,692
  90,975
  100,624
  110,658
  121,094
  131,955
  143,262
  155,039
  167,312
  180,109
  193,458
  207,389
  221,934
  237,128
  253,006
  269,605
  286,963
  305,123
  324,128
  344,021
  364,851
  386,667
  409,522
  433,469
  458,566
Total liabilities, $m
  84,536
  91,850
  99,501
  107,458
  115,729
  124,325
  133,258
  142,541
  152,190
  162,224
  172,660
  183,521
  194,828
  206,605
  218,878
  231,675
  245,024
  258,955
  273,500
  288,694
  304,572
  321,171
  338,529
  356,689
  375,694
  395,587
  416,417
  438,233
  461,088
  485,035
  510,132
Total equity, $m
  38,274
  41,653
  45,122
  48,731
  52,482
  56,380
  60,431
  64,641
  69,017
  73,567
  78,299
  83,225
  88,352
  93,693
  99,259
  105,062
  111,115
  117,433
  124,029
  130,920
  138,120
  145,647
  153,519
  161,754
  170,373
  179,394
  188,840
  198,734
  209,098
  219,958
  231,339
Total liabilities and equity, $m
  122,810
  133,503
  144,623
  156,189
  168,211
  180,705
  193,689
  207,182
  221,207
  235,791
  250,959
  266,746
  283,180
  300,298
  318,137
  336,737
  356,139
  376,388
  397,529
  419,614
  442,692
  466,818
  492,048
  518,443
  546,067
  574,981
  605,257
  636,967
  670,186
  704,993
  741,471
Debt-to-equity ratio
  0.861
  0.970
  1.060
  1.150
  1.220
  1.290
  1.350
  1.410
  1.460
  1.500
  1.550
  1.590
  1.620
  1.650
  1.690
  1.710
  1.740
  1.770
  1.790
  1.810
  1.830
  1.850
  1.870
  1.890
  1.900
  1.920
  1.930
  1.950
  1.960
  1.970
  1.980
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
  9,727
  10,710
  11,731
  12,792
  13,895
  15,041
  16,232
  17,470
  18,758
  20,097
  24,965
  26,416
  27,928
  29,503
  31,146
  32,860
  34,649
  36,517
  38,468
  40,507
  42,640
  44,869
  47,202
  49,644
  52,200
  54,876
  57,680
  60,616
  63,694
  66,919
Depreciation, amort., depletion, $m
  2,055
  5,276
  5,319
  5,364
  5,411
  5,459
  5,510
  5,562
  5,616
  5,673
  5,732
  1,035
  1,098
  1,165
  1,234
  1,306
  1,381
  1,460
  1,542
  1,628
  1,717
  1,811
  1,909
  2,011
  2,118
  2,230
  2,348
  2,471
  2,600
  2,735
  2,876
Funds from operations, $m
  9,978
  15,003
  16,029
  17,095
  18,203
  19,354
  20,551
  21,794
  23,087
  24,431
  25,829
  25,999
  27,514
  29,092
  30,737
  32,452
  34,241
  36,109
  38,059
  40,096
  42,225
  44,450
  46,778
  49,213
  51,762
  54,430
  57,224
  60,150
  63,216
  66,428
  69,795
Change in working capital, $m
  183
  627
  653
  679
  706
  733
  762
  792
  823
  856
  890
  927
  965
  1,005
  1,047
  1,092
  1,139
  1,188
  1,241
  1,296
  1,355
  1,416
  1,481
  1,549
  1,621
  1,697
  1,777
  1,861
  1,950
  2,043
  2,141
Cash from operations, $m
  9,795
  14,376
  15,376
  16,416
  17,497
  18,621
  19,789
  21,002
  22,264
  23,575
  24,939
  25,073
  26,550
  28,088
  29,690
  31,360
  33,103
  34,920
  36,818
  38,799
  40,870
  43,034
  45,297
  47,664
  50,141
  52,733
  55,447
  58,289
  61,266
  64,385
  67,654
Maintenance CAPEX, $m
  0
  -476
  -518
  -561
  -606
  -652
  -701
  -751
  -804
  -858
  -915
  -973
  -1,035
  -1,098
  -1,165
  -1,234
  -1,306
  -1,381
  -1,460
  -1,542
  -1,628
  -1,717
  -1,811
  -1,909
  -2,011
  -2,118
  -2,230
  -2,348
  -2,471
  -2,600
  -2,735
New CAPEX, $m
  -1,705
  -1,222
  -1,255
  -1,305
  -1,357
  -1,410
  -1,465
  -1,523
  -1,583
  -1,646
  -1,712
  -1,782
  -1,855
  -1,932
  -2,014
  -2,099
  -2,190
  -2,286
  -2,386
  -2,493
  -2,605
  -2,723
  -2,848
  -2,979
  -3,118
  -3,264
  -3,417
  -3,579
  -3,750
  -3,929
  -4,117
Cash from investing activities, $m
  -9,355
  -1,698
  -1,773
  -1,866
  -1,963
  -2,062
  -2,166
  -2,274
  -2,387
  -2,504
  -2,627
  -2,755
  -2,890
  -3,030
  -3,179
  -3,333
  -3,496
  -3,667
  -3,846
  -4,035
  -4,233
  -4,440
  -4,659
  -4,888
  -5,129
  -5,382
  -5,647
  -5,927
  -6,221
  -6,529
  -6,852
Free cash flow, $m
  440
  12,678
  13,603
  14,550
  15,535
  16,558
  17,622
  18,728
  19,877
  21,071
  22,312
  22,317
  23,660
  25,057
  26,512
  28,027
  29,606
  31,253
  32,971
  34,765
  36,637
  38,594
  40,638
  42,776
  45,012
  47,351
  49,799
  52,362
  55,046
  57,857
  60,802
Issuance/(repayment) of debt, $m
  990
  7,314
  7,651
  7,957
  8,271
  8,596
  8,933
  9,283
  9,650
  10,033
  10,437
  10,861
  11,307
  11,777
  12,273
  12,797
  13,349
  13,931
  14,546
  15,194
  15,878
  16,599
  17,359
  18,160
  19,004
  19,893
  20,830
  21,816
  22,855
  23,947
  25,097
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
  7,314
  7,651
  7,957
  8,271
  8,596
  8,933
  9,283
  9,650
  10,033
  10,437
  10,861
  11,307
  11,777
  12,273
  12,797
  13,349
  13,931
  14,546
  15,194
  15,878
  16,599
  17,359
  18,160
  19,004
  19,893
  20,830
  21,816
  22,855
  23,947
  25,097
Total cash flow (excl. dividends), $m
  1,768
  19,992
  21,254
  22,507
  23,806
  25,154
  26,555
  28,011
  29,526
  31,104
  32,748
  33,178
  34,967
  36,834
  38,785
  40,824
  42,955
  45,184
  47,517
  49,959
  52,515
  55,192
  57,997
  60,936
  64,016
  67,245
  70,629
  74,179
  77,901
  81,804
  85,899
Retained Cash Flow (-), $m
  -4,444
  -3,379
  -3,470
  -3,608
  -3,751
  -3,898
  -4,051
  -4,210
  -4,376
  -4,550
  -4,733
  -4,925
  -5,128
  -5,341
  -5,566
  -5,803
  -6,053
  -6,318
  -6,596
  -6,890
  -7,200
  -7,527
  -7,872
  -8,235
  -8,618
  -9,021
  -9,446
  -9,893
  -10,364
  -10,860
  -11,381
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
 
  16,613
  17,785
  18,898
  20,055
  21,256
  22,504
  23,801
  25,150
  26,554
  28,015
  28,253
  29,839
  31,493
  33,219
  35,020
  36,902
  38,867
  40,921
  43,068
  45,315
  47,665
  50,125
  52,701
  55,398
  58,223
  61,183
  64,285
  67,536
  70,944
  74,518
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
 
  15,526
  15,433
  15,121
  14,685
  14,131
  13,467
  12,706
  11,862
  10,951
  9,993
  8,614
  7,682
  6,756
  5,855
  4,998
  4,197
  3,465
  2,810
  2,236
  1,744
  1,332
  995
  726
  517
  359
  242
  159
  101
  63
  37
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 30.2
Price to Sales 1.1
Price to Book 5.5
Price to Tangible Book
Price to Cash Flow 21.7
Price to Free Cash Flow 26.2
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 8.7% 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 966.842 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 $215.4 billion.

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COMPANY NEWS

▶ Top 3 Healthcare Stocks for 2017   [Dec-10-17 04:45PM  Investopedia]
▶ Will CVS Get the Chance to Buy Aetna?   [Dec-07-17 09:25PM  Motley Fool]
▶ UnitedHealth to Buy Large Doctor Group for $4.9 Billion   [Dec-06-17 11:58PM  The Wall Street Journal]
▶ Business Highlights   [06:00PM  Associated Press]
▶ MARKET FOOLERY // 12-04-2017   [04:35PM  Motley Fool]
▶ 3 Stocks Jump on Wednesday   [03:29PM  GuruFocus.com]
▶ Bitcoin Surges past $13,000: MARKETS LIVE   [02:44PM  TheStreet.com]
▶ UnitedHealth's MedExpress partners with Walgreens on urgent care   [01:55PM  American City Business Journals]
▶ Why DaVita Inc. Jumped Higher Today   [12:52PM  Motley Fool]
▶ How UnitedHealth Group Makes its Money   [09:22AM  Investopedia]
▶ UnitedHealth buying DaVita's doctor group for $4.9 billion   [08:15AM  American City Business Journals]
▶ UnitedHealth to Buy Large Doctor Group for $4.9 Billion   [07:10AM  The Wall Street Journal]
▶ DaVita Medical Group to Join Optum   [06:45AM  Business Wire]
▶ Multiple Companies Reach Yearly Highs   [Dec-05-17 11:09AM  GuruFocus.com]
▶ How an Aetna/CVS behemoth would stack up against UnitedHealth   [11:00AM  American City Business Journals]
▶ UnitedHealth Wants to Be the Next Tech Incubator   [Nov-29-17 08:29PM  Motley Fool]
▶ UnitedHealth Group Powers Dow Higher   [12:31PM  TheStreet.com]
▶ [$$] UnitedHealth Reaches an Unhealthy Altitude   [12:24AM  The Wall Street Journal]
▶ Why UnitedHealth Looks Healthy   [11:58AM  Barrons.com]
▶ [$$] UnitedHealth Reaches an Unhealthy Altitude   [11:28AM  The Wall Street Journal]
▶ Dow Paces Opening Gains; This IBD 50 Name Soars   [09:42AM  Investor's Business Daily]
▶ Why You Should Put Microsoft, 3M, CAT On Your Watch List Now   [09:00AM  Investor's Business Daily]
▶ Company News For Nov 28, 2017   [08:37AM  Zacks]
▶ UnitedHealth falls on mixed 2018 guidance   [04:35PM  CNBC Videos]
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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