Is UnitedHealth Group the Most Undervalued Stock in the Market Right Now?

$UnitedHealth(UNH)$

As we approach the midpoint of 2025, markets have been showing increasing strength. Year to date, we've seen a significant number of companies return to positive territory, with many climbing into double-digit gains. Investors are feeling more confident, and optimism is cautiously returning. But while the broader market is stabilizing—and even thriving in some areas—there’s one glaring outlier that stands in stark contrast.

That outlier is UnitedHealth Group (UNH)—a company that has not only been one of the worst performers in its sector but may actually be the worst-performing stock in the entire S&P 500 this year.

Stock Performance: UNH in Freefall

UnitedHealth’s stock is down roughly 40% year to date, an astonishing drop for a company of its size and stature. Over the past 12 months, shares are down 39%, erasing years of gains in just a few months. This sharp decline is even more striking when compared with some of its peers in the healthcare sector:

• CVS is up 43% year to date

• Elevance Health (ELV) is up 4%

• Cigna (CI) is up 14%

This divergence highlights that the issue isn’t sector-wide. The problem is very specific to UnitedHealth—and that demands a deeper look.

So the natural question for long-term investors is: Is this a broken business? Or is this a rare opportunity to buy a high-quality compounder at a massive discount near its 52-week low?

Let’s dig in.

Wall Street and Analyst Sentiment

Despite the negative momentum, Wall Street and major platforms like Seeking Alpha are still rating UNH as a “Buy.”

That said, analyst sentiment has shifted in recent weeks. We've seen a wave of downward price target revisions:

• Wolfe Research: Cut their target to $390, but still maintain an “Outperform” rating

• Truist: Lowered their target to $360, while also suggesting this could be a serious buying opportunity

• HSBC: Issued one of the most bearish outlooks, slashing their target to just $270, effectively labeling it a stock to avoid

• KeyBanc: Also trimmed expectations, but still sees notable upside

• JPMorgan: Remains bullish, holding onto a target of $445

So, what’s causing this split between valuation support and bearish momentum?

Why the Stock is Falling: Headlines and Controversies

A string of troubling news items has eroded investor confidence:

• Executive Turmoil: Just last month, a high-ranking executive abruptly resigned, citing “personal reasons,” shortly before the company slashed its full-year forecast.

• Federal Investigations: The Wall Street Journal reported that UnitedHealth is under criminal investigation for Medicare fraud.

• Allegations of Unethical Practices: Reports surfaced accusing the company of secretly paying nursing homes to reduce hospital transfers.

• Patient Abuse Claims: Another bombshell—claims that UNH pressured medical staff to change patients’ status to “Do Not Resuscitate” under questionable circumstances.

This wave of negative press, along with the criminal investigation, has likely driven much of the recent selloff. From a sentiment standpoint, it makes sense. But the key question is: Has the market overreacted?

Long-Term Fundamentals Still Intact

Despite the recent turmoil, UNH’s long-term performance remains compelling:

• Over the past 10 years, UNH is up 190%, just slightly ahead of the S&P 500, which is up 185%.

• Historically, the company has traded at a premium valuation, but now sits at a forward P/E of just 13. That’s far below its 5-year average P/E of 20—a 36% discount.

• The dividend yield is also unusually attractive: near 3%, compared to a 5-year average of just 1.42%.

From a value investor’s perspective, those are glaring signs that the stock could be deeply undervalued.

Blue Tunnel Valuation & Intrinsic Price

Using the Blue Tunnel intrinsic valuation method, the outlook is mixed but interesting. The model typically tracks the estimated fair value of a stock over time. In UNH’s case, the intrinsic price is falling, not rising—a potential concern. However, the current price is well below even the lower end of that range, signaling significant near-term undervaluation.

Looking back over the last five years, this is not a company that typically trades at a discount. From 2020 through early 2023, UNH was frequently overvalued, suggesting that today’s pricing is an exception rather than the norm.

Relative Valuation: Sector & Growth

Despite a C++ valuation grade, UNH’s current forward P/E of 13 compares favorably to the healthcare sector average of 18—a 26% discount.

But what about growth?

• UNH earns an F for growth, but their year-over-year revenue is up 8%, and forward-looking estimates put it at 9%—actually above the sector average.

• Earnings per share is the main drag. Future EPS growth is projected at 7%, below the sector’s 10.6% and far below UNH’s historical 13.3% average.

Even so, this is still one of the fastest-growing companies in its space on a revenue basis.

Latest Earnings and Business Performance

• Revenue for the most recent quarter was up 10% year-over-year, surpassing $100 billion.

• Net income rose 7 percentage points, and premium revenue, which accounts for the bulk of business, was up 11%.

• However, UNH projects 3 out of the next 4 quarters will show declines, with only one quarter expected to show growth.

• The company has a 75% beat rate over the past four quarters but did miss by $0.09 in the most recent one.

Even using 2026 EPS projections of $26, UNH is trading at just 11.5x forward earnings. That’s deep value territory.

Dividend Safety, Capital Allocation, and Free Cash Flow

• UNH just increased their dividend by 5.2%, slightly above inflation.

• While this is below their 10-year average dividend growth rate of 19%, they’ve increased the dividend for 15 consecutive years.

• Their dividend safety score is 80 (Safe), although it was recently downgraded.

• Free cash flow payout ratio is well below 60%—averaging around 30% annually. On a trailing 12-month basis: 31%.

• Free cash flow for the next year is projected to reach $28.1 billion.

• Return on Invested Capital (ROIC) sits at 14%, indicating strong capital allocation.

• Net debt to EBITDA is a healthy 1.2x, well below the red flag level of 3x.

Institutional and Insider Confidence

• Institutional ownership sits at 88%.

  Sold $36 billion over the last 12 months.

  Bought $56 billion—clearly net positive.

  In Q1 alone: $19 billion in buys vs. $9 billion in sells.

• Insiders also bullish:

  Over the past year, bought $32 million worth of stock while selling just $2.5 million.

  Most recent major insider buy was on May 15th:

  CFO bought $5M worth

  CEO bought $25M worth

Even Congresswoman Marjorie Taylor Greene reported a buy on the same day—whether or not that influences your decision, it shows growing insider conviction.

Cash Flow, Profitability & Sector Comparison

• UNH’s operating cash flow is climbing: now at $29 billion, well above its 5-year average of $24.6 billion.

• Profit margins remain healthy:

  Net margin at 5.4%, compared to the sector’s -2%.

• Overall, UNH earns an A+ on profitability.

Final Valuation and Intrinsic Price Target

We used four models to estimate UNH’s intrinsic value:

1. Graham’s Formula: $287

2. P/E Multiple Valuation: Also near $287

3. Dividend Discount Model: $404

4. Discounted Cash Flow (DCF): $555

Average of all models: $410 Current price: $302

That implies a 25% margin of safety, suggesting fair value may sit around $386, with deep value below $310.

Wall Street’s average price target? $380—or 26% upside.

Conclusion: Buy, Hold, or Avoid?

UnitedHealth Group is facing real headwinds—no doubt about it. The string of controversies and investigations are concerning. But from a purely financial and valuation standpoint, this looks like a company that’s been unfairly punished.

The fundamentals remain strong. The company continues to grow revenue, maintain profitability, generate free cash flow, and attract insider and institutional confidence.

So, the question is: Do you believe in UNH’s long-term story?

If so, this may be a rare chance to buy one of the market’s best compounders at a multi-year low.Disclaimer: I want to make it clear that I am not a financial advisor, and nothing I say is intended to be a recommendation to buy or sell any financial instrument. Additionally, it's important to remember that there are no guarantees or certainties in trading or investing, and you should never invest money that you can't afford to lose.

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