NEW YORK (TheStreet) -- Benjamin Graham taught that intelligent investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk. By using our ModernGraham method one can review a company's historical accomplishments and determine an intrinsic value that can be compared across industries.
Here is our specific look at how UnitedHealth Group (UNH) fares in our valuation model.
In our view, there are two types of investors: defensive (more conservative, less able to conduct research) and enterprising (more willing to take risk and conduct research). Any stock suitable for a defensive investor is also appropriate for an enterprising investor. Let's look at how the stock fares for each type of investor.
Defensive Investor -- must pass at least 6 of the following 7 tests: Score = 6/7
- Adequate Size of Enterprise -- market capitalization of at least $2 billion -- PASS
- Sufficiently Strong Financial Condition -- current ratio greater than 2 -- FAIL
- Earnings Stability -- positive earnings per share for at least 10 straight years -- PASS
- Dividend Record -- has paid a dividend for at least 10 straight years -- PASS
- Earnings Growth -- earnings per share has increased by at least 1/3 over the last 10 years using 3 year averages at beginning and end of period -- PASS
- Moderate PEmg ratio -- PEmg is less than 20 -- PASS
- Moderate Price to Assets -- PB ratio is less than 2.5 or PB x PEmg is less than 50 -- PASS
Enterprising Investor -- must pass at least 4 of the following 5 tests or be suitable for a defensive investor: Score = 3/5
- Sufficiently Strong Financial Condition, Part 1 -- current ratio greater than 1.5 -- FAIL
- Sufficiently Strong Financial Condition, Part 2 -- Debt to Net Current Assets ratio less than 1.1 -- FAIL
- Earnings Stability -- positive earnings per share for at least 5 years -- PASS
- Dividend Record -- currently pays a dividend -- PASS
- Earnings growth -- EPSmg greater than 5 years ago -- PASS
Next let's consider the stock's valuation.