UnitedHealth (NYSE:UNH) stock is up 5% in a week, following a recovery in the broader markets, with the S&P 500 index rising 1.5% over this period. The Federal Open Market Committee (FOMC) meeting, delivering on market expectations with unchanged interest rates and a less hawkish tone than anticipated, triggered a broad market rally on Wednesday, March 19.
Amid the current volatility and a rise in UNH stock, we think it still looks attractive – making it a good pick to buy at its current price of around $500. We believe there are some minor concerns with UNH stock, which makes it attractive given that its current valuation looks low.
We arrive at our conclusion by comparing the current valuation of UNH stock with its operating performance over the recent years as well as its current and historical financial condition. Our analysis of UnitedHealth along key parameters of Growth, Profitability, Financial Stability, and Downturn Resilience shows that the company has a strong operating performance and financial condition, as detailed below. However, for investors who seek lower volatility than individual stocks, the Trefis High-Quality portfolio presents an alternative – having outperformed the S&P 500 and generated returns exceeding 91% since its inception.
How Does UnitedHealth’s Valuation Look vs. The S&P 500?
Going by what you pay per dollar of sales or profit, UNH stock looks slightly cheap compared to the broader market.
• UnitedHealth has a price-to-sales (P/S) ratio of 1.2 vs. a figure of 3.2 for the S&P 500
• Additionally, the company’s price-to-operating income (P/EBIT) ratio is 16 compared to 24.3 for S&P 500
• And, it has a price-to-earnings (P/E) ratio of 32 vs. the benchmark’s 24.3
How Have UnitedHealth’s Revenues Grown Over Recent Years?
UnitedHealth’s Revenues have seen notable growth over recent years.
• UnitedHealth has seen its top line grow at an average rate of 12% over the last 3 years (vs. increase of 6.3% for S&P 500)
• Its revenues have grown 7.7% from $372 Bil to $400 Bil in the last 12 months (vs. growth of 5.2% for S&P 500)
• Also, its quarterly revenues grew 6.8% year-over-year to $101 Bil in the most recent quarter (vs. 5.0% improvement for S&P 500)
How Profitable Is UnitedHealth?
UnitedHealth’s profit margins are much worse than most companies in the Trefis coverage universe. It is because of UnitedHealth’s nature of high-volume and low-margin business.
• UnitedHealth’s Operating Income over the last four quarters was $32 Bil, which represents a low Operating Margin of 8.1% (vs. 13.0% for S&P 500)
• UnitedHealth’s Operating Cash Flow (OCF) over this period was $24 Bil, pointing to a low OCF-to-Sales Ratio of 6.0% (vs. 15.7% for S&P 500)
Does UnitedHealth Look Financially Stable?
UnitedHealth’s balance sheet looks strong.
• UnitedHealth’s Debt figure was $77 Bil at the end of the most recent quarter, while its market capitalization is $464 Bil (as of 3/19/2025). This implies a strong Debt-to-Equity Ratio of 17% (vs. 19.0% for S&P 500). [Note: A lower Debt-to-Equity Ratio is desirable]
• Cash (including cash equivalents) makes up $29 Bil of the $298 Bil in Total Assets for UnitedHealth. This yields a moderate Cash-to-Assets Ratio of 10% (vs. 14.8% for S&P 500)
How Resilient Is UNH Stock During A Downturn?
UNH stock has been more resilient than the benchmark S&P 500 index during some of the recent downturns. Worried about the impact of a market crash on UNH stock? Our dashboard How Low Can Stocks Go During A Market Crash captures how key stocks fared during and after the last six market crashes.
Inflation Shock (2022)
• UNH stock fell 17.2% from a high of $546.01 on 20 April 2022 to $452.06 on 20 June 2022, vs. a peak-to-trough decline of 25.4% for the S&P 500
• The stock fully recovered to its pre-Crisis peak by 16 August 2022
• Since then, the stock has increased to a high of $625.25 on 11 November 2024 and currently trades at around $500
Covid Pandemic (2020)
• UNH stock fell 36.2% from a high of $305.31 on 19 February 2020 to $194.86 on 23 March 2020, vs. a peak-to-trough decline of 33.9% for the S&P 500
• The stock fully recovered to its pre-Crisis peak by 1 June 2020
Global Financial Crisis (2008)
• UNH stock fell 72.4% from a high of $58.99 on 23 December 2007 to $16.30 on 20 November 2008, vs. a peak-to-trough decline of 56.8% for the S&P 500
• The stock fully recovered to its pre-Crisis peak by 2 April 2012
Putting All The Pieces Together: What It Means For UNH Stock
In summary, UnitedHealth’s performance across the parameters detailed above are as follows:
• Growth: Very Strong
• Profitability: Very Weak
• Financial Stability: Strong
• Downturn Resilience: Very Strong
• Overall: Neutral
Taken together with its low valuation, this makes the stock look attractive, which supports our conclusion that UNH is a good stock to buy. In fact, we estimate UnitedHealth Group’s valuation at $590 per share, reflecting a 17% upside from its current levels. Our forecast is based on 1.4x trailing sales, aligning with the stock’s average price-to-sales ratio over the last five years.
Preserve & Grow Wealth with Risk-Focused Quality Portfolios
While UNH stock looks promising, investing in a single stock can be risky. On the other hand, the Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has a track record of comfortably outperforming the S&P 500 over the last 4-year period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride as evident in HQ Portfolio performance metrics.
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