2 Growth Stocks to Buy at a Discount

The stock market is on fire as 2024 kicks off. As a result, many investors might be reviewing their long-term financial goals as well as their plans for stock purchases. As always, it’s best to invest consistently in stocks so you can benefit from all types of market environments.

If you have capital to deploy right now, there are plenty of stocks begging to be bought, some of which are trading at discounts despite their steadily growing businesses. Here are two such names to consider now for a long-term investment.

1. UnitedHealth Group

UnitedHealth Group (UNH -0.46%) is the largest healthcare company in the world by revenue. This is thanks to its flagship insurance business UnitedHealthcare and its Optum business, the latter including a variety of services ranging from specialty pharmacy solutions for patients, to analytics and research solutions for medical providers as well as other members of the healthcare industry.

UnitedHealth Group is currently trading down by single digits from its 52-week high. It’s been a rough period for health insurance stocks recently, particularly as the rising costs of claims cuts into the top and bottom lines of companies across the industry.

These rising costs are attributable to a range of factors, including the fact that consumers are filing more claims as they play catch-up for procedures and other forms of medical care that were postponed during the pandemic. With the advent of an aging population, a rising number of outpatient and inpatient claims are to be expected as well.

Even as claims are elevated compared to the full pandemic period (when many procedures like surgeries were postponed), regulatory changes are also a notable factor in the cost of doing business. For example, Medicare coverage expansions that have provided meaningful changes for affected consumers are also increasing costs for companies like UnitedHealth Group.

Amid this landscape, UnitedHealth is demonstrating marked resilience as it harvests revenue and profits. Its Optum business is growing at roughly twice the rate of the UnitedHealthcare segment, which is also enabling this overall resilience in the face of operating conditions that are largely beyond the company’s control.

In 2023, UnitedHealth Group revenue totaled $372 billion, up 15% from 2022. Earnings from operations for the 12-month period rose 14% year over year to $32 billion. Broken down by segment, UnitedHealthcare saw revenue rise 13% from 2022, while revenue from the Optum business surged 24%. Over the trailing 12 months, UnitedHealth Group brought in $29 billion in cash from operations. Over the past decade, this business has grown its annual revenue and profits by 185% and 298%, respectively.

Of note for income investors, UnitedHealth has also paid a dividend in some form since 1990. The company switched to a quarterly dividend from an annual one in 2010 and has consistently raised its payout ever since. UnitedHealth Group’s current yield is 1.5%, in line with the S&P 500 average. The last five years alone have seen its payout hiked by about 109%.

This is a solid healthcare business to add to a well-diversified basket of stocks, and one that can provide some long-term passive income to boot.

2. Teladoc Health

Teladoc Health (TDOC 1.58%) hasn’t garnered top marks from investors for some time now, with a wave of pessimism following pandemic heights driving shares down. The stock is down about 36% from where it was a year ago.

Investors haven’t been happy with the company’s continued losses, along with its decelerating growth from the worst of the pandemic when telehealth adoption rose at an unprecedented clip.

But Teladoc has been steadily slashing its net losses in recent quarters. And most of its net losses in the last few years have been non-cash in nature, such as the multibillion-dollar impairment charges to write down the acquisitions it made during the pandemic. Also, Teladoc’s growth has slowed from the height of the pandemic.

This was inevitable at some point as those growth rates were not sustainable nor realistic for a company as established in its growth story as Teladoc is. It’s one of the largest telehealth entities in the world, with a significant footprint in a multibillion-dollar addressable market.

The global telehealth market is still growing at a strong pace. It’s valued at approximately $123 billion, and is expected to achieve a compound annual growth rate of 24% over the coming years, and a valuation of $455 billion by 2030.

Those are durable market trends, and Teladoc is in good position to benefit from them. Its integrated-care segment, which includes services like chronic care and primary care, is driving steady revenue growth, as is its teletherapy segment BetterHelp. In the third quarter of 2023, integrated care revenue totaled $374 million, a 9% increase from one year ago and 4% higher than the prior quarter.

The integrated care segment ended the quarter with more than 90 million members worldwide, over 4 million of which were added within the three-month period alone. Teladoc’s chronic care program was the leading driver of this segment’s growth. The program recorded 49,000 new enrollments in the quarter, for a total of 1.1 million individuals at the end of the period, up 13% year over year.

In the third quarter of 2023, Teladoc brought in total revenue of $660 million and adjusted earnings of $89 million. Those two figures were up 8% and 73%, respectively, from one year ago. This healthcare stock has a growth story still to tell, and investors who stay along for the ride might find the wait was worth the bumps along the way.

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