UnitedHealth Group (UNH) is experiencing its worst year yet, with the company’s latest earnings report adding fuel to the fire. The health insurer’s revenue rose 2% in the second quarter, but its bottom line plummeted by 43%. This decline is largely attributed to rising medical costs, which have increased the medical care ratio from 85.1% last year to 89.4% this quarter.
The higher the ratio, the less profitable the company becomes. UnitedHealth’s earnings per share are projected to come in at $16 or better this year, but analysts were expecting $20.91. As a result, the stock dropped again after the news. Shares of UNH have lost half their value in 2025 and may not have bottomed out yet.
However, with its five-year return currently at -16% before factoring in dividends, UnitedHealth’s stock is trading at an extremely low price-to-earnings multiple of around 11. Analysts are paying a significant discount to the company’s trailing earnings. If analysts reduce their expectations for the stock, that earnings multiple could rise.
Investors may be tempted to avoid UNH due to its current woes. However, if you’re willing to take a contrarian position and plan to hold on for multiple years, it might not be a bad idea to invest in the company now. The average S&P 500 stock trades at a price-to-earnings multiple of 25, making UnitedHealth’s significantly discounted valuation more attractive.
Key takeaways include:
* UnitedHealth’s earnings per share are projected below expectations
* Rising medical costs have increased the medical care ratio
* UNH’s stock is trading at an extremely low price-to-earnings multiple
* The company is working on improving profitability and exiting some Medicare Advantage markets to curb costs
* A long-term investment approach may be suitable for this stock
Source: https://www.fool.com/investing/2025/08/05/unitedhealth-group-just-released-more-bad-news-sho