UNH Stock Outlook: Bullish or Bearish
UnitedHealth Group Incorporated (UNH Stock Ticker) is the biggest healthcare provider in the United States. With a market capitalization of 430 Billion USD, it is one of the top 17 companies by capitalization in the S&P500 and the second most valuable company in the S&P500 Health Care Index, behind Eli Lilly and Company (LLY).
It is our experience that large, diversified companies with a history of good corporate governance, like UNH, are potentially very good investments. We say potentially, as every company and investment opportunity is unique. While a systematic approach to investing is preferable, it does not guarantee a successful result.
Analyst Ratings and Price Targets for UNH Stock
Let’s start with analysts’ ratings, courtesy of seekingalpha.com:
Currently, 27 out of 28 analysts who have issued an update on the company in the last 90 days have either Buy or Strong Buy ratings. Only one has Hold ratings and no Sell ratings. This is as good as it gets in terms of ratings. We can see that analysts’ opinions on the stock have been generally positive throughout the last three years.
Now, let’s look at analysts’ price targets:
We find that price range beautiful. Given that UNH stock trades around 470 USD per share right now, the lowest price target is 600 (+28%), the average is 637 (+36.5%), and the highest is 700, or 50% higher than current levels.
Yes, analysts love the company and think it is really cheap. Their opinion is important but nothing beats a good valuation check.
Valuation and Investor Sentiment on UNH Stock
According to finviz.com, UNH stock forward P/E ratio is 13.9 while EPS for the next 5 years are expected to grow on average 11.24%. Making for a forward PEG ratio of 1.24. Just as a comparison S&P500 has a forward P/E ratio of 23.47 and 5-year earnings growth is expected to be 13.60% annually, making for a forward PEG ratio of 1.72. Yes, UNH stock is trading at a notable discount to S&P500.
Finally, let’s move into investors take of the company:
Investors show strong confidence in UNH, as highlighted by Finviz. Institutions hold nearly 90% of the shares, comfortably exceeding our 70% threshold. Short float at 0.84% of shares outstanding is as good as it gets – nobody is betting that the company has any significant downside.
Regulatory Risks and Market Reactions
The great valuation can easily trick investors into feeling complacent and believing that they are guaranteed at least a 28% upside or more. Of course, such a return seems likely, but that doesn’t mean there’s no risk. It is important to investigate why such, presumably, great stock trades at such cheap levels? The answer is complex but it comes down to a series of negative events. In the middle of January UNH reported revenues that were slightly below consensus, by 0.89%. The company beat earnings estimates but markets focused on the revenue miss. Then last Friday, on 21 Fabruary 2025, the DOJ announced that it is investigating the Medicare billing practices at UNH.
Keep in mind that investors should judge companies, and people, based on their overall performance, not on any single event or decision. Both analysts and investors universally love UNH stock. Companies of this caliber rarely miss earnings or revenue estimates. Additionally, they seldom face serious regulatory issues.
While it is possible that the DOJ investigation finds errors/faults with UNH’s Medicare practices, it is our opinion that those errors/faults are unlikely to be big and seriously impact the prospects of UNH. And who is to say that the DOJ will find anything wrong?
We will trust the opinions of the analysts and most investors and buy the stock because it is very rare to have such a quality company trade at such a discount to its fair value.