Is It Time To Reassess UnitedHealth Group (UNH) After A 36% One Year Share Price Fall

• If you are wondering whether UnitedHealth Group's current share price reflects its underlying worth, you are not alone. This article is set up to help you unpack that question clearly.
• The stock last closed at US$290, with returns of a 1.1% decline over 7 days, an 18.6% decline over 30 days, a 13.8% decline year to date and a 36.3% decline over 1 year, adding important context for anyone reassessing risk and potential reward.
• Recent coverage has focused on UnitedHealth Group's role in the broader US healthcare system and ongoing industry-level regulatory scrutiny. These factors can influence how investors think about long-term pricing power and costs. This backdrop helps explain why the market is paying close attention to any updates on the business model, capital allocation and the stability of its health insurance operations.
• Simply Wall St's valuation model currently gives UnitedHealth Group a 5 out of 6 valuation score. Next we will walk through what standard approaches like P/E, cash flow and asset-based measures are saying about the stock, before finishing with a more complete way to think about value that ties these methods together.

Find out why UnitedHealth Group's -36.3% return over the last year is lagging behind its peers.

Approach 1: UnitedHealth Group Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow, or DCF, model estimates what a company could be worth by projecting its future cash flows and discounting them back to today’s value.

For UnitedHealth Group, the model uses a 2 Stage Free Cash Flow to Equity approach, starting from last twelve months free cash flow of about US$15.8b. Analysts provide explicit free cash flow estimates for the next few years, and Simply Wall St then extrapolates further out, with projected free cash flow of US$27.8b in 2030. All figures here are in US$.

By discounting this series of projected cash flows, the model arrives at an estimated intrinsic value of US$818.37 per share. Compared with the recent share price of US$290, the DCF output suggests the stock trades at a 64.6% discount to this intrinsic estimate. This indicates a wide gap between price and modelled value.

This is a single model with its own assumptions. On these inputs UnitedHealth Group screens as materially undervalued on a cash flow basis.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests UnitedHealth Group is undervalued by 64.6%. Track this in your watchlist or portfolio, or discover 54 more high quality undervalued stocks.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for UnitedHealth Group.

Approach 2: UnitedHealth Group Price vs Earnings

For a profitable company, the P/E ratio is a useful shorthand for how much you are paying for each dollar of current earnings, which most investors already watch closely. What counts as a “normal” P/E depends on how the market views a company’s earnings growth potential and risk, with higher expected growth or lower perceived risk often lining up with a higher multiple.

UnitedHealth Group currently trades on a P/E of 21.8x. That sits slightly above its peer average of 21.1x and below the broader Healthcare industry average of 23.9x. Simply Wall St also calculates a “Fair Ratio” for UnitedHealth Group of 40.2x, which is the P/E level suggested by inputs such as earnings growth estimates, profit margins, industry, market cap and specific risk factors.

This Fair Ratio aims to be more tailored than a simple comparison with peers or the sector, because it ties the multiple directly to company specific characteristics rather than only who it sits next to in an index. Set against the current 21.8x P/E, the Fair Ratio of 40.2x indicates the shares trade well below this model based reference point.

Result: UNDERVALUED

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Upgrade Your Decision Making: Choose your UnitedHealth Group Narrative

Earlier we mentioned that there is an even better way to understand valuation. On Simply Wall St you can use Narratives, where you write a simple story about UnitedHealth Group, link it to your own revenue, earnings and margin assumptions, and the platform turns that into a Fair Value you can compare with the current price to help decide whether you want to buy, hold or sell. Everything updates automatically as new news or earnings arrive. One investor might build a cautious Narrative that lines up with a Fair Value near the low analyst end around US$198, while another builds a more optimistic Narrative closer to the high end around US$626. Both can then see in one place how their view of the business story flows through to forecasts and into a valuation on the Community page used by millions of other investors.

For UnitedHealth Group, however, we will make it really easy for you with previews of two leading UnitedHealth Group Narratives:

🐂 UnitedHealth Group Bull Case

Fair value in this bullish Narrative: US$392.24 per share

Implied pricing gap vs last close: about 26% below this fair value

Revenue growth assumption: 4.53% a year

• Analysts in this Narrative see Medicare Advantage and Medicaid margin normalization, plus Optum restructuring, as key drivers for a multi year earnings recovery.
• They build in revenue growth of 5.8% a year over the next 3 years, with profit margins moving from 5.0% to 4.0%, and earnings of US$20.0b by around August 2028.
• To line up with their consensus price target of US$327.29, they assume a 2028 P/E of 17.0x and a discount rate of about 6.8%. They also stress that you should test those inputs against your own view of the business.

🐻 UnitedHealth Group Bear Case

Fair value in this cautious Narrative: US$284.09 per share

Implied pricing gap vs last close: about 2% above this fair value

Revenue growth assumption: 1.49% a year

• The bearish Narrative leans on tighter CMS rate assumptions, ongoing policy probes and regulatory pressure that are expected to weigh on margins across key businesses.
• It assumes slower revenue growth of 3.5% a year, margin compression from 5.0% to 3.4% by 2028 and earnings of US$15.8b, valued on a 13.2x P/E and a 6.8% discount rate.
• This view lines up with the lowest analyst target of US$198.0 and focuses on the risk that government programs, rising medical costs and competition keep a lid on earnings power and valuation multiples.

Do you think there's more to the story for UnitedHealth Group? Head over to our Community to see what others are saying!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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