UnitedHealth is trading at a valuation gap that hasn’t existed since the company went public in 1984. The stock closed at $291.71 today, down 2.95%, with a market cap of $264.6 billion. The S&P 500’s average price-to-earnings ratio is hovering near 21.3. UnitedHealth is sitting at 12.2x earnings. That’s a 42.7% discount to the index. This divergence is the widest on record. It’s not just cheap. It’s historically misaligned.
The company’s 52-week high was $630.73. It’s now down 53.8% from that level. Dividend yield is 3.03%. Free cash flow last quarter was $18.2 billion. Debt-to-equity sits at 28.6%. Cash-to-assets ratio is 11.1%. These are fortress numbers. The balance sheet is clean. The payout is safe. The valuation is broken.
Q2 earnings drop July 29. Guidance was cut to $24.65–$25.15 EPS. That’s down from $26.00–$26.50. The market didn’t like it. But the revised range still implies 8.5% forward earnings growth. Optum is growing at 15% annually. Medicaid enrollment is stable. The Medicare Advantage segment is under pressure, but the company still leads the category.
The DOJ probe into billing practices is real. Three shareholder lawsuits are active. CEO Andrew Witty resigned in May. Stephen Hemsley is back in charge. The company pulled its 2025 outlook. That’s the bear case. Regulatory risk. Leadership churn. Legal overhang.
But the stock is trading at 12.2x earnings. That’s below its 20-year average of 17.4x. It’s below the S&P. It’s below peers. It’s below everything. Analysts still peg a $415 target. That’s 42.2% upside from here. JPMorgan, UBS, Piper Sandler, and Barclays all rate it overweight. Insiders are buying. Institutions are holding. The setup is asymmetric.
If earnings stabilize and the DOJ probe fades, this stock rerates fast. If it doesn’t, the dividend still pays 3.03% while you wait. The company is profitable. The cash flow is real. The valuation is absurd.
Disclaimer: This is not financial advice.
Sources:
https://www.marketbeat.com/stocks/NYSE/UNH/forecast/
https://www.morningstar.com/stocks/unitedhealth-pulls-2025-outlook-replaces-ceo
https://www.forbes.com/sites/greatspeculations/2025/07/02/unitedhealth-buy-or-sell-unh-stock-at-325/