UnitedHealth Group: A Wonderful Business At A Discounted Price

Core Viewpoint - UnitedHealth Group (UNH) is currently rated as a STRONG BUY by Wall Street analysts, with a score of 4.55, reflecting strong sentiment and confidence in the stock's long-term earning power and reasonable valuation following recent price corrections [3][4]. Analyst Ratings - Out of 27 analysts, 17 recommend Strong Buy, 8 recommend Buy, 2 recommend Hold, and none recommend Sell or Strong Sell, indicating a predominantly positive outlook [3]. Earnings Outlook - Analysts project a steady EPS growth for UNH at a CAGR of 9.5% over the next decade, supported by the company's scale and differentiated business model, particularly its vertical integration and data-driven approach [5][10]. Valuation Metrics - UNH is currently trading at a forward P/E of 18.8x, which is approximately 6% lower than the sector median of 19.9x and about 7% lower than its 5-year average P/E of 20.2x, suggesting a slight discount in valuation [7][8]. Cash Flow Analysis - The two-stage discounted free cash flow model estimates UNH's fair price at around $766 per share, compared to its current price of $581, indicating a significant margin of safety [12][16]. Medical Cost Ratio - By the end of 2023, UNH's medical cost ratio averaged 83.2%, up from 82.0% the previous year, with a peak of 85.0% in December, attributed to increased insurance usage as the pandemic recedes [4][10]. Competitive Advantages - UNH's competitive edge lies in its vertical integration and investment in technology and data analytics, which enhance care coordination and optimize health outcomes, positioning the company favorably in the evolving healthcare landscape [5][10]. Future Growth Projections - The projected free cash flow per share is expected to grow from $27.60 in 2023 to $68.40 by 2032, reflecting a robust growth trajectory [16].