Aetna (NYSE: AET) and UnitedHealth Group (NYSE:UNH) are both large-cap medical companies, but which is the better stock? We will contrast the two businesses based on the strength of their risk, earnings, valuation, institutional ownership, dividends, analyst recommendations and profitability.

Analyst Recommendations

This is a breakdown of current ratings for Aetna and UnitedHealth Group, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Aetna 0 6 13 0 2.68
UnitedHealth Group 0 0 22 0 3.00

Aetna currently has a consensus target price of $163.69, suggesting a potential upside of 1.77%. UnitedHealth Group has a consensus target price of $216.57, suggesting a potential upside of 4.38%. Given UnitedHealth Group’s stronger consensus rating and higher possible upside, analysts plainly believe UnitedHealth Group is more favorable than Aetna.

Dividends

Aetna pays an annual dividend of $2.00 per share and has a dividend yield of 1.2%. UnitedHealth Group pays an annual dividend of $3.00 per share and has a dividend yield of 1.4%. Aetna pays out 43.7% of its earnings in the form of a dividend. UnitedHealth Group pays out 33.3% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. UnitedHealth Group has raised its dividend for 7 consecutive years. UnitedHealth Group is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Earnings & Valuation

This table compares Aetna and UnitedHealth Group’s top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Aetna $62.20 billion 0.86 $6.06 billion $4.58 35.12
UnitedHealth Group $196.63 billion 1.04 $16.14 billion $9.02 23.00

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

Institutional and Insider Ownership

89.5% of Aetna shares are owned by institutional investors. Comparatively, 86.1% of UnitedHealth Group shares are owned by institutional investors. 0.9% of Aetna shares are owned by insiders. Comparatively, 0.9% of UnitedHealth Group shares are owned by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock will outperform the market over the long term.

Profitability

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

Net Margins Return on Equity Return on Assets
Aetna 2.52% 20.52% 5.35%
UnitedHealth Group 4.50% 21.52% 6.99%

Volatility and Risk

Aetna has a beta of 0.53, suggesting that its stock price is 47% less volatile than the S&P 500. Comparatively, UnitedHealth Group has a beta of 0.63, suggesting that its stock price is 37% less volatile than the S&P 500.

Summary

UnitedHealth Group beats Aetna on 15 of the 17 factors compared between the two stocks.

About Aetna

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.

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.

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