Aetna (NYSE: AET) and Universal American (NYSE:UAM) are both medical companies, but which is the better stock? We will compare the two businesses based on the strength of their analyst recommendations, risk, earnings, institutional ownership, dividends, valuation and profitabiliy.

Profitability

This table compares Aetna and Universal American’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Aetna 1.84% 17.75% 4.53%
Universal American -5.12% -24.95% -8.23%

Insider and Institutional Ownership

91.8% of Aetna shares are held by institutional investors. Comparatively, 85.7% of Universal American shares are held by institutional investors. 0.9% of Aetna shares are held by insiders. Comparatively, 7.7% of Universal American shares are held by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company will outperform the market over the long term.

Risk & Volatility

Aetna has a beta of 0.54, indicating that its share price is 46% less volatile than the S&P 500. Comparatively, Universal American has a beta of 1.74, indicating that its share price is 74% more volatile than the S&P 500.

Dividends

Aetna pays an annual dividend of $2.00 per share and has a dividend yield of 1.3%. Universal American does not pay a dividend. Aetna pays out 62.3% of its earnings in the form of a dividend.

Analyst Recommendations

This is a breakdown of recent recommendations and price targets for Aetna and Universal American, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Aetna 0 6 14 0 2.70
Universal American 0 4 0 0 2.00

Aetna currently has a consensus target price of $153.24, suggesting a potential downside of 1.97%. Universal American has a consensus target price of $9.67, suggesting a potential downside of 3.04%. Given Aetna’s stronger consensus rating and higher probable upside, equities research analysts plainly believe Aetna is more favorable than Universal American.

Valuation and Earnings

This table compares Aetna and Universal American’s revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Aetna $62.63 billion 0.83 $5.73 billion $3.21 48.69
Universal American N/A N/A N/A ($0.86) -11.59

Aetna has higher revenue and earnings than Universal American. Universal American is trading at a lower price-to-earnings ratio than Aetna, indicating that it is currently the more affordable of the two stocks.

Summary

Aetna beats Universal American on 10 of the 13 factors compared between the two stocks.

Aetna Company Profile

Aetna Inc. is a diversified healthcare benefits company. The Company operates through three segments: Health Care, Group Insurance and Large Case Pensions. It offers a range of traditional, voluntary and consumer-directed health insurance products and related services, including medical, pharmacy, dental, behavioral health, group life and disability plans, medical management capabilities, Medicaid healthcare management services, Medicare Advantage and Medicare Supplement plans, workers’ compensation administrative services and health information technology (HIT) products and services. The Health Care segment consists of medical, pharmacy benefit management services, dental, behavioral health and vision plans offered on both an Insured basis and an employer-funded basis, and emerging businesses products and services. The Group Insurance segment includes group life insurance and group disability products. Its products are offered on an Insured basis.

Universal American Company Profile

Universal American Corp. provides an array of health insurance and managed care products and services to people covered by Medicare. The Company’s segments include Medicare Advantage, Management Services Organization (MSO), and Corporate & Other. The Medicare Advantage segment contains the operations of its initiatives in managed care for seniors. It operated 16 Medicare Shared Saving Program Accountable Care Organizations (ACOs) and two Next Generation ACOs, which included approximately 5,200 participating providers with approximately 221,800 assigned Medicare fee-for-service beneficiaries, as of December 31, 2016. The MSO segment supports its physician partnerships in the development of healthcare models, such as ACOs, with a range of capabilities and resources, including technology, analytics, clinical care coordination, regulatory compliance and program administration. It has developed a primary care physician alignment strategy, which is branded as The Healthy Collaboration.

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