Contrasting UnitedHealth Group (NYSE:UNH) & Select Medical (NYSE:SEM)

Select Medical (NYSE:SEM) and UnitedHealth Group (NYSE:UNH) are both medical companies, but which is the superior stock? We will compare the two companies based on the strength of their earnings, analyst recommendations, valuation, dividends, risk, profitability and institutional ownership.

Dividends

Select Medical pays an annual dividend of $0.25 per share and has a dividend yield of 1.7%. UnitedHealth Group pays an annual dividend of $8.84 per share and has a dividend yield of 2.9%. Select Medical pays out 18.7% of its earnings in the form of a dividend. UnitedHealth Group pays out 37.0% 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 increased its dividend for 15 consecutive years. UnitedHealth Group is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Volatility and Risk

Select Medical has a beta of 1.34, suggesting that its share price is 34% more volatile than the S&P 500. Comparatively, UnitedHealth Group has a beta of 0.45, suggesting that its share price is 55% less volatile than the S&P 500.

Analyst Recommendations

This is a breakdown of recent ratings for Select Medical and UnitedHealth Group, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Select Medical	0	1	4	0	2.80
UnitedHealth Group	1	8	16	0	2.60

Select Medical presently has a consensus target price of $26.00, indicating a potential upside of 74.94%. UnitedHealth Group has a consensus target price of $427.09, indicating a potential upside of 41.96%. Given Select Medical’s stronger consensus rating and higher possible upside, research analysts clearly believe Select Medical is more favorable than UnitedHealth Group.

Insider & Institutional Ownership

89.5% of Select Medical shares are held by institutional investors. Comparatively, 87.9% of UnitedHealth Group shares are held by institutional investors. 11.6% of Select Medical shares are held by company insiders. Comparatively, 0.3% of UnitedHealth Group shares are held by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company will outperform the market over the long term.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Select Medical	2.81%	11.04%	3.25%
UnitedHealth Group	5.39%	26.29%	8.67%

Earnings & Valuation

This table compares Select Medical and UnitedHealth Group”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Select Medical	$5.19 billion	0.37	$214.04 million	$1.34	11.09
UnitedHealth Group	$400.28 billion	0.68	$14.41 billion	$23.88	12.60

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

Summary

UnitedHealth Group beats Select Medical on 11 of the 17 factors compared between the two stocks.

About Select Medical

Select Medical Holdings Corporation, through its subsidiaries, operates critical illness recovery hospitals, rehabilitation hospitals, outpatient rehabilitation clinics, and occupational health centers in the United States. It operates in four segments: Critical Illness Recovery Hospital, Rehabilitation Hospital, Outpatient Rehabilitation, and Concentra. The Critical Illness Recovery Hospital segment consists of hospitals that provide services for heart failure, infectious disease, respiratory failure and pulmonary disease, surgery requiring prolonged recovery, renal disease, neurological events, and trauma. The Rehabilitation Hospital segment offers therapy and rehabilitation treatments, including rehabilitative services for brain and spinal cord injuries, strokes, amputations, neurological disorders, orthopedic conditions, pediatric congenital or acquired disabilities, and cancer. The Outpatient Rehabilitation segment operates rehabilitation clinics that provide physical, occupational, and speech rehabilitation programs and services; and specialized programs, such as functional programs for work related injuries, hand therapy, post-concussion rehabilitation, pediatric and cancer rehabilitation, and athletic training services. The Concentra segment operates and provides occupational health centers, telemedicine platforms, onsite clinics, and contract services at employer worksites that deliver occupational health services, consumer health, physical therapy, and preventive care. Select Medical Holdings Corporation was founded in 1996 and is headquartered in Mechanicsburg, Pennsylvania.

About UnitedHealth Group

UnitedHealth Group Incorporated operates as a diversified health care company in the United States. The company operates through four segments: UnitedHealthcare, Optum Health, Optum Insight, and Optum Rx. The UnitedHealthcare segment offers consumer-oriented health benefit plans and services for national employers, public sector employers, mid-sized employers, small businesses, and individuals; health care coverage, and health and well-being services to individuals age 50 and older addressing their needs; Medicaid plans, children's health insurance and health care programs; and health and dental benefits, and hospital and clinical services, as well as health care benefits products and services to state programs caring for the economically disadvantaged, medically underserved, and those without the benefit of employer-funded health care coverage. The Optum Health segment provides care delivery, care management, wellness and consumer engagement, and health financial services patients, consumers, care delivery systems, providers, employers, payers, and public-sector entities. The Optum Insight segment offers software and information products, advisory consulting arrangements, and managed services outsourcing contracts to hospital systems, physicians, health plans, governments, life sciences companies, and other organizations. The Optum Rx segment provides pharmacy care services and programs, including retail network contracting, home delivery, specialty and community health pharmacy services, infusion, and purchasing and clinical capabilities, as well as develops programs in the areas of step therapy, formulary management, drug adherence, and disease/drug therapy management. UnitedHealth Group Incorporated was founded in 1974 and is based in Minnetonka, Minnesota.