With the worst global pandemic since World War I, healthcare has taken the spotlight in the past year and a half. Hundreds of thousands of people have been hospitalized in the U.S. due to COVID or required some sort of treatment, and health insurance covers these expensive bills, most Americans couldn’t afford out of pocket.
The high demand for healthcare and fear of the coronavirus has led to a sharp increase in signing up for memberships. With more premiums being paid, more money lands on the balance sheets of top health insurance companies. When you add in the increasing general healthcare needs of older Americans, health insurance stocks are looking like a worthwhile investment.
This was evident in the most recent quarter, where health insurance companies performed exceedingly well. This high demand for insurance isn’t expected to change anytime soon, so there is still plenty of room for gains for select health insurance companies. Anthem Inc. (ANTM), UnitedHealth Group Inc. (UNH), and Molina Healthcare Inc (MOH) are three cream of the crop health insurance stocks to consider.
Anthem Inc. (ANTM)
ANTM is one of the largest private health insurance organizations nationwide, providing medical benefits to roughly 44 million medical members. The company offers employer, individual, and government-sponsored coverage plans. It is also the largest single Blue Cross Blue Shield branded coverage provider, operating as the licensee for the Blue Cross Blue Shield Association in 14 states.
The company had a strong third quarter where earnings beat estimates and rose 61.7% year over year. Growth was driven by an increase in revenue from Medicaid and Medicare, along with a premium rate increase and higher membership. Its pharmacy benefits manager, IngenioRx, also had a solid quarter due to its integrated medical and pharmacy membership growth.
A massive rise in virtual care services bodes well for the next few quarters. ANTM has an overall grade of A, which translates into a Strong Buy rating in our POWR Ratings system. The company has a Growth Grade of A as analysts forecast earnings to soar 100.8% year over year in the current quarter. Its low valuation led to a Value Grade of B, as the stock has a forward P/E of 14.88.
We also provide Momentum, Stability, Sentiment, and Quality grades for ANTM, which you can find here. ANTM is ranked #1 in the B-rated Medical – Health Insurance industry. For more top stocks in this industry, click here.
UnitedHealth Group Inc. (UNH)
UNH is the largest private health insurance provider in the United States, providing medical benefits to 48 million members across its U.S. and international businesses. As a leader in employer-sponsored, self-directed, and government-backed insurance plans, the company has obtained massive scale in managed care.
Plus, its investments in its Optum franchises have created a healthcare services titan, spanning everything from medical and pharmaceutical benefits to providing outpatient care and analytics. Like ANTM, UNH also has a strong third-quarter. Earnings outperformed estimates and rose 28.8% year over year due to an increase in the number of people served through its community and senior offerings.
UNH has an overall grade of A and a Strong Buy rating in our POWR Ratings system. The company has a Growth Grade of B, which makes sense as analysts expect earnings to surge 71% year over year in the current quarter. UNH also has a Quality Grade of B due to solid fundamentals. At the end of the most recent quarter, the company had $23.9 billion in cash compared to no short-term debt.
For the rest of UNH’s grades (Value, Momentum, Stability, and Sentiment), click here. UNH is ranked #2 in the Medical – Health Insurance industry.
Molina Healthcare Inc (MOH)
MOH offers healthcare plans focused on Medicaid-related solutions for low-income families and individuals. Its health plans are operated by a network of subsidiaries, each of which is licensed as a health maintenance organization (HMO). In addition to its Health Plans segment, the company has a Medicaid Solutions segment that provides solutions to U.S. state governments for their Medicaid management information systems.
In the third quarter, MOH saw its sales jump 40.2% year over year and outperform analyst expectations. Much of that growth was driven by an increase in membership and higher premium revenue. The boost to membership came through contract wins in its Medicare and Medicaid businesses. MOH also began a restructuring program to improve its operational efficiency.
The company has an overall grade of A, translating into a Strong Buy rating in our POWR Ratings system. MOH has a Value Grade of B, which isn’t surprising with a forward P/E of 17.86 and price to free cash flow well below the industry average. The company also has a Quality Grade of B due to strong fundamentals.
Its current and quick ratios are both 1.5, which means that the company has enough liquidity to cover any short-term obligations. Its return on equity of 23.4% is also encouraging. To access all of MOH’s grades, such as Growth, Momentum, Stability, and Sentiment, click here. MOH is ranked #3 in the Medical – Health Insurance industry.
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This article was written by David Cohne, Chief Value Strategist for StockNews.com. David has helped investors find the most profitable stocks for over 20 years.
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ANTM shares were unchanged in after-hours trading Thursday. Year-to-date, ANTM has gained 35.38%, versus a 25.26% rise in the benchmark S&P 500 index during the same period.
About the Author: David Cohne
David Cohne has 20 years of experience as an investment analyst and writer. Prior to StockNews, David spent eleven years as a consultant providing outsourced investment research and content to financial services companies, hedge funds, and online publications. David enjoys researching and writing about stocks and the markets. He takes a fundamental quantitative approach in evaluating stocks for readers. More...
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