Earnings per share (EPS) in the Spotlight – UnitedHealth Group Incorporated (NYSE: UNH)

A surge in US government bond yields to their highest level in almost seven years sent Wall Street shares sliding on Tuesday (May 15) after strong retail sales data stoked inflation concerns and shareholders fretted about looming trade talks between the United States and China.

All three major US stock indexes closed down, with the S&P 500 ending a four-day winning streak and the Dow Jones Industrial Average posting its first loss in eight sessions.

The yield on 10-year US Treasury notes jumped to its highest level since July 2011, suggesting an uptick in inflation and sending the dollar index to its highest close in 2018, raising expectations for further interest rate hikes from the Federal Reserve.

Core April retail sales – which excludes gasoline, automobiles, building materials and food services – rose at a brisker 0.4 per cent monthly pace over March, as consumer spending is quickening its pace after a first-quarter slowdown.

Shareholders also remain preoccupied by the run-up to high-level talks between China and the United States set to begin this week in Washington.

The Dow Jones Industrial Average fell 193.00 points (0.78 per cent) to 24,706.41, the S&P 500 lost 18.68 points (0.68 per cent) to 2,711.45 and the Nasdaq Composite dropped 59.69 points (0.81 per cent) to 7,351.63.

The losses were broad-based, with all 11 major S&P sectors except energy closing down. Real estate, healthcare and technology stocks posted the biggest percentage losses.

Home Depot Inc shares slipped 1.6 per cent after the home improvement retailer missed sales forecasts as the long winter put a damper on demand for spring products. Smaller rival Lowe’s Companies Inc was down 1.0 per cent.

Declining issues outnumbered advancing ones on the NYSE by a 1.87-to-1 ratio; on Nasdaq, a 1.14-to-1 ratio favoured decliners.

The S&P 500 posted 10 new 52-week highs and seven new lows; the Nasdaq Composite recorded 82 new highs and 51 new lows.

Volume on US exchanges was 6.60 billion shares, contrast with the 6.67 billion-share average for the full session over the last 20 trading days. (Source: Reuters)

Stock to Watch: UnitedHealth Group Incorporated (NYSE: UNH)

On Tuesday, Shares of UnitedHealth Group Incorporated (NYSE: UNH) -1.40% and ended its trading session at $239.50. The company saw 2,396,560 shares trade hands over the course of the day. Given that its average daily volume over the 30 days has been 3.44M shares a day, this signifies a pretty noteworthy change over the norm.

Technical Analysis:

The analysts, on average, are forecasting a $270.71 price target, but the individual stock is already up 43.71% from its recent lows. However, the stock is trading at -4.50% as compared to recent highs. Leading up to this report, we have seen a 3.99% return in the stock price over the last 30 days and a 5.67% return over the past 3 months. Since the starting of the calendar year, the stock’s performance is recorded at 8.64%.

The stock price recently practiced a 5-day change of 3.22% with 4.71 as average true range (ATR). UNH has a beta of 0.73 and RSI is 57.22. The stock declared an annual dividend of $1.25% per share.

Role of Net Income in Calculating EPS:

Businesses use net income to calculate their earnings per share (EPS). Business analysts often refer to net income to as the bottom line, since it is listed at the bottom of the income statement. In the United Kingdom, NI is known as profit attributable to shareholders. To know the company’s net income – refer to this link: http://finviz.com. UnitedHealth Group Incorporated (NYSE: UNH) is a stock with 966.00M shares outstanding. As the earnings per share (EPS) formula is stated as earnings available to common shareholders divided by number of common stock shares outstanding, therefore its diluted EPS is calculated to be 10.14 (ttm). EPS is an indicator of company profit because the more earnings a company can generate per share, the more valuable each share is to shareholders.

A key aspect of EPS that’s often overlooked is the capital that is required to generate the earnings (net income) in the calculation. Two companies could generate the same EPS number, but one could do so with less equity (investment) – that company would be more efficient at using its capital to generate income and, all other things being equal would be a “better” company. Shareholders also need to be aware of earnings manipulation that will affect the quality of the earnings number. It is important not to rely on any one financial measure, but to use it in conjunction with statement analysis and other measures.

Role of EPS in Calculating Price to Earnings Ratio (P/E):

Earnings per share are generally pondered to be the single most essential variable in determining a share’s price. It is also a key component used to calculate the price-to-earnings valuation (P/E) ratio.

Analysts also use the price-to-earnings (P/E) ratio for stock valuation, which is calculated as market price per share ($239.50) divided by EPS (10.14). Price to earnings ratio (P/E) for UNH stock is recorded at $23.61. The P/E ratio calculates how expensive a stock price is relative to the earnings produced per share. For example, if the P/E ratio of a stock is 20 times earnings, an analyst compares that P/E ratio to other companies in the same industry and to the ratio for the broader market.

Analysts’ Recommendation to Consider:

Analysts have a mean recommendation of 1.50 on this stock (A rating of less than 2 means buy, “hold” within the 3 range, “sell” within the 4 range, and “strong sell” within the 5 range).

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Chad Pitman

Chad Pitman

I am Chad Pitman and I focus on breaking news stories and ensuring we (“Stocks Market Cap”) offer timely reporting on some of the most recent stories released through market wires about “Emerging Stocks”. I have formerly spent over 3 years as a trader in U.S. Stock Market and is now semi-stepped down. I work on a full time basis for stocksmarketcap.com specializing in quicker moving active shares with a short term view on investment opportunities and trends.

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