CVS Health stock is considered a better pick over UnitedHealth Group stock due to its attractive valuation. While UnitedHealth has delivered better revenue growth and is more profitable, CVS is trading at a lower valuation multiple. UnitedHealth stock has seen strong gains, while CVS has experienced a decline. However, both stocks have underperformed the S&P 500 index. The Trefis High Quality Portfolio has consistently outperformed the S&P 500, showing better returns with less risk.
UnitedHealth’s revenue growth has been better than CVS, with a 13% average annual growth rate in the last three years. The company’s OptumHealth business has been a significant driver of revenue growth, particularly due to increased demand for health care services. CVS, on the other hand, saw revenue growth driven by Covid-19 testing and vaccine administration, which has now slowed down. Both companies are expected to see mid-to-high single-digit revenue growth in the next three years.
UnitedHealth is more profitable than CVS, with a higher operating margin and better financial position. The company’s debt levels are lower, and it has more cash on hand compared to CVS. While UnitedHealth has superior revenue growth, profitability, and financial position, analysts believe that CVS has more room for growth if it returns to its historical average valuation multiple.
Despite a downbeat Q1 in 2024, CVS stock is seen as a potential long-term investment opportunity. The company is expected to benefit from the growth of its healthcare and pharmacy services businesses, as well as increased prescription volume and drug price inflation. CVS’s recent acquisitions of Signify Health and Oak Street Health are also expected to contribute to its top-line expansion in the coming years.
While CVS may outperform UnitedHealth in the next three years, it is important to consider how UnitedHealth’s peers perform on key metrics. Investors can use peer comparisons to make informed investment decisions across industries. Overall, CVS Health stock is seen as a better pick due to its attractive valuation and potential for long-term gains.
