Magellan Health (MGLN) versus UnitedHealth Group (NYSE:UNH) Critical Analysis

Magellan Health (NASDAQ: MGLN) and UnitedHealth Group (NYSE:UNH) are both medical companies, but which is the better investment? We will contrast the two businesses based on the strength of their analyst recommendations, earnings, risk, dividends, profitabiliy, institutional ownership and valuation.

Earnings & Valuation

This table compares Magellan Health and UnitedHealth Group’s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	EBITDA	Earnings Per Share	Price/Earnings Ratio
Magellan Health	$5.03 billion	0.38	$245.90 million	$3.46	23.08
UnitedHealth Group	$189.04 billion	0.98	$14.99 billion	$8.54	22.46

UnitedHealth Group has higher revenue and earnings than Magellan Health. UnitedHealth Group is trading at a lower price-to-earnings ratio than Magellan Health, indicating that it is currently the more affordable of the two stocks.

Dividends

UnitedHealth Group pays an annual dividend of $3.00 per share and has a dividend yield of 1.6%. Magellan Health does not pay a dividend. UnitedHealth Group pays out 35.1% of its earnings in the form of a dividend. Magellan Health has increased its dividend for 7 consecutive years.

Volatility and Risk

Magellan Health has a beta of 0.59, suggesting that its share price is 41% less volatile than the S&P 500. Comparatively, UnitedHealth Group has a beta of 0.64, suggesting that its share price is 36% less volatile than the S&P 500.

Analyst Ratings

This is a summary of recent ratings and recommmendations for Magellan Health and UnitedHealth Group, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Magellan Health	1	0	3	0	2.50
UnitedHealth Group	0	0	21	0	3.00

Magellan Health currently has a consensus price target of $80.25, suggesting a potential upside of 0.50%. UnitedHealth Group has a consensus price target of $199.55, suggesting a potential upside of 4.05%. Given UnitedHealth Group’s stronger consensus rating and higher possible upside, analysts plainly believe UnitedHealth Group is more favorable than Magellan Health.

Insider & Institutional Ownership

94.1% of Magellan Health shares are owned by institutional investors. Comparatively, 86.2% of UnitedHealth Group shares are owned by institutional investors. 3.6% of Magellan Health shares are owned by insiders. Comparatively, 0.9% of UnitedHealth Group shares are owned by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company is poised for long-term growth.

Profitability

This table compares Magellan Health and UnitedHealth Group’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Magellan Health	1.64%	9.05%	4.21%
UnitedHealth Group	4.32%	21.52%	6.81%

Summary

UnitedHealth Group beats Magellan Health on 13 of the 17 factors compared between the two stocks.

About Magellan Health

Magellan Health, Inc. is engaged in the healthcare management business. The Company’s segments include Healthcare, Pharmacy Management and Corporate. It is focused on managing special populations, complete pharmacy benefits and other specialty areas of healthcare. Its Healthcare includes its management of behavioral healthcare services and employee assistance program (EAP) services, management of other specialty areas, including diagnostic imaging and musculoskeletal management, and the integrated management of physical, behavioral and pharmaceutical healthcare for special populations, delivered through Magellan Complete Care (MCC). Its Pharmacy Management segment consists of products and solutions that provide clinical and financial management of pharmaceuticals paid under medical and pharmacy benefit programs. Its Corporate segment consists primarily of operational support functions. It provides services to health plans and other managed care organizations (MCOs).

About UnitedHealth Group

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.