UnitedHealth Group Incorporated UNH

UnitedHealth fell about 61% in 2025 — from roughly $608 in November 2024 to about $238 by August — because its medical costs ran far ahead of the prices it had locked in. The consolidated medical-care ratio jumped to 89.4% in the second quarter, up 430 basis points in a year, as Medicare Advantage utilization surged (a ~7.5% cost trend versus the ~5% priced), a new CMS risk model (V28) cut reimbursable acuity, and Medicaid redeterminations left a sicker pool. Diluted GAAP earnings fell from $6.85 a share in Q1 to about $0.011 in Q4, even though revenue held near $112 billion every quarter.

Largely, on the numbers: in the first quarter of 2026 UnitedHealth earned $6.90 a share — slightly above its pre-crisis $6.85 — at an ~8.0% operating margin, with the medical-cost ratio back down to 83.9% from 84.8% a year earlier. Net income was $6.28 billion and free cash flow $8.15 billion, and the loss-making OptumHealth unit returned to ~$1.3 billion of earnings. The company raised its 2026 adjusted-EPS guide above $18.25. The open question is durability — the quarter was helped by ~$500 million of favorable reserve development, and management guides the full-year cost ratio near 88.8%.

The ~31× trailing P/E is an artifact of depressed earnings, not an expensive stock. Trailing twelve-month EPS is only about $13.24 because it still includes the near-zero fourth quarter of 2025 ($0.011 a share), when the operating margin fell to 0.3%. Measured against the recovered first quarter of 2026 annualized — $6.90 × 4 ≈ $27.60 — the stock trades closer to 14.8× at its ~$408 price. So the real debate is which earnings number is right: the depressed trailing figure or the run-rate the recovery implies. Consensus adjusted EPS is about $18.4 for 2026 and $20.9 for 2027.

UnitedHealth has confirmed it is cooperating with both a criminal and a separate civil Department of Justice investigation into its Medicare Advantage billing — specifically whether it coded diagnoses to inflate the per-member payments it received from Medicare. Reporting indicates the criminal inquiry has since widened to OptumRx and how the company pays its own physicians. A Senate report built on roughly 50,000 pages of documents accuses it of turning risk-adjustment coding into a profit strategy. As of mid-2026 the matters remain open and unresolved, with no charge or settlement announced.

That is the central uncertainty. While the first quarter of 2026 showed the medical-cost ratio back at 83.9%, the company guides the full-year 2026 ratio to about 88.8% — barely off the ~89% trough and well above the 82–84% band it ran historically. The drivers are partly permanent: the V28 risk model removes roughly $130 billion of Medicare Advantage payments, Medicaid margins are expected to stay negative, and the company is shedding 1.3–1.4 million members. So a single 8%-margin quarter may be the start of a slow climb rather than a full return to the old earning power.

At about $408 — right on the analysts' average target of ~$410 — the price discounts a near-complete, linear margin recovery: that the 2025 collapse was a one-off mispricing and the $6.90 first quarter is the new baseline, putting the stock near 14.8× a ~$27.60 run-rate rather than 31× trailing. It also assumes the cost ratio keeps normalizing, the DOJ probes resolve without hitting risk-adjustment revenue, and Medicare Advantage funding stays manageable. What it discounts less generously is the chance the reset is structural — a high-80s cost ratio that makes the run-rate too high.