Key Points
-
Health insurer UnitedHealth Group faced a confluence of bad news in 2025 that tanked its stock price.
-
The stock has bounced back since April, up 61% in the past two months.
-
Should you buy UnitedHealth stock now?
- 10 stocks we like better than UnitedHealth Group ›
UnitedHealth Group (NYSE: UNH) has been one of the best buys in the healthcare sector over the past two months, with shares rising roughly 57% since the end of March.
The stock price of the nation’s largest health insurer is now up 29% year to date and 38% over the past 12 months. It is an impressive bounce-back, considering shares had fallen to a nearly seven-year low of $234.60 per share on Aug. 1 last year.
One year earlier, on Aug. 1, 2024, UnitedHealth traded at $572 per share and reached an all-time closing high of $625 per share on Nov. 11, 2024. From that high, the stock price plummeted a staggering 62% over the next nine months.
What brought on UnitedHealth’s 61% drop?
The precipitous fall has been well documented both on The Motley Fool and elsewhere. It was a confluence of factors that included the shocking murder of Brian Thompson, CEO of the UnitedHealthcare arm, on Dec. 4, 2024.
But at the same time, UnitedHealth’s earnings started tanking as the firm was hit by a huge increase in Medicare Advantage costs, driven by a surge in elective surgeries and procedures and by patients likely holding off on procedures since the pandemic. This took a huge bite out of earnings.
Also, its Optum division took a hit due in large part to Medicare funding reductions. On top of that, UnitedHealth had been under investigation by the Justice Department for antitrust concerns and its billing practices.
Finally, amid the sinking ship, the CEO of UnitedHealth Group, Andrew Witty, abruptly resigned in May 2025 after four years serving in the role. It made matters worse that the company suspended its guidance, creating massive doubt and uncertainty for investors.
How UNH bounced back
After UNH hit rock bottom last August, it slowly started climbing back up. It was partly because the stock was so cheap. After losing some 60% of its value, its P/E ratio plummeted from about 33 to around 13 last June.
One bright spot was that UNH was able to maintain its dividend and even raised it for the 16th straight year. Investors looking for a cheap, high-yield dividend stock found one in UNH.
The company also made a pivot, focusing less on new enrollments, exiting some markets, and repricing plans to improve profitability.
That pivot started to show in its Q1 earnings report. Revenue rose 2% while earnings fell 1% year over year, but earnings were up significantly from the December quarter. Also, its medical cost ratio (MCR) dropped to 83.9%, down 90 basis points year over year. This is a measure of efficiency, as it means UNH spent less on healthcare for every dollar collected in premiums.
The company also raised its earnings guidance for this fiscal year to greater than $17.35 per share, up from the previous guidance of $17.10. That would be up from $13.23 per share in 2025.
The strong earnings were one tailwind, but the company also received good news from the federal government, which boosted Medicare Advantage plan rates by 2.48% for 2027. Those rates should directly benefit UnitedHealth by providing it with more money to cover medical costs, potentially increasing profits.
Should you buy UnitedHealth stock?
So UnitedHealth has some momentum heading into the second-quarter earnings season, but the fact is, the recent surge has raised UNH’s valuation. The P/E ratio is now 32, its highest since March 2025, when the stock price started tanking. There were many other factors at play a year ago that waylaid UNH stock, but the only other time the P/E ratio has been this elevated was around its 2024 peak.
While things are improving, UnitedHealth does not have the kind of earnings power to carry that high multiple. For that reason, I don’t think UNH is a particularly good deal right now after this big run-up.
Should you buy stock in UnitedHealth Group right now?
Before you buy stock in UnitedHealth Group, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and UnitedHealth Group wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Netflix made this list on December 17, 2004… if you invested $1,000 at the time of our recommendation, you’d have $410,833!* Or when Nvidia made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you’d have $1,208,693!*
Now, it’s worth noting Stock Advisor’s total average return is 917% — a market-crushing outperformance compared to 209% for the S&P 500. Don’t miss the latest top 10 list, available with Stock Advisor, and join an investing community built by individual investors for individual investors.
Dave Kovaleski has no position in any of the stocks mentioned. The Motley Fool recommends UnitedHealth Group. The Motley Fool has a disclosure policy.
