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Richard Moroney Image Richard Moroney Editor, Dow Theory Forecasts

This health-care giant is on the move, thanks to excellent placement in the profit centers of the industry and a smart acquisition in Latin America, writes Richard Moroney of Dow Theory Forecasts.

UnitedHealth Group (UNH) has grown sales every year since 1990, while cash from operations has declined just twice in the past 25 years. But that’s the nature of managed care—a low-margin, yet steady business.

UnitedHealth is not only the industry’s biggest company, but also its most consistent profit grower. With about 70% of its 2013 business priced, UnitedHealth reports pricing trends stronger than last year’s.

Management sees sales climbing 11% to 12%, helped by an acquisition in Brazil, while operating cash flow is projected to climb 1% to 6%. In January, the insurer reiterated its 2013 target for per-share profits of $5.25 to $5.50, versus the consensus of $5.52 and the $5.28 earned in 2012. It also expressed confidence about growing profits in 2014, easing some concerns about the Affordable Care Act.

UnitedHealth has a history of issuing conservative guidance, then raising its outlook throughout the year. At 11 times trailing earnings—29% below its ten-year average—the stock is rated a Focus List Buy and a Long-Term Buy.

UnitedHealth relies more on commercial business than most major rivals, with 66% of its members enrolled in such plans. That means UnitedHealth won’t capture the lion’s share of the up to 30 million new patients expected to receive health insurance in connection with the Affordable Care Act.