UNH Shares Bought Over HIMS as Earnings Confidence Grows

Investors reallocating from high-flying growth names to undervalued stalwarts might find UnitedHealth Group’s latest guidance a compelling pivot point, especially when forward multiples scream bargain relative to historical norms.

Valuation Reset Draws Bargain Hunters

UnitedHealth’s projection of at least $16 in adjusted earnings per share for 2025 positions the stock at roughly 15.6 times that figure, based on its current price around $250. That’s a steep discount to the company’s five-year average forward P/E of 20-25, and even undercuts the broader US healthcare industry’s typical 20.7 multiple. This compression stems from recent operational stumbles, including soaring medical costs that hammered second-quarter results, with adjusted EPS landing at $4.08 against expectations of $4.64. Yet, the guidance implies a floor, not a ceiling, suggesting management sees room for upside if execution tightens.

Contrast this with frothier corners of healthcare, where valuations stretch into triple digits. A name like Hims & Hers Health exemplifies the growth-at-any-price mindset that appears to be waning. Selling into such strength to rotate into UnitedHealth makes tactical sense—locking in gains from a stock that has surged significantly while buying into one that has slumped. It’s a classic value play: trade ephemeral momentum for durable earnings power.

CEO Confidence Signals Turnaround Potential

Stephen Hemsley’s tone during the recent earnings call radiated assurance, emphasising operational fixes and a return to growth by 2026. Having stepped back into the CEO role amid prior guidance withdrawals, Hemsley highlighted strengthened disciplines and execution focus as antidotes to the medical loss ratio’s unwelcome spike to 89.4% from 85.1% a year ago. This isn’t blind optimism; it is rooted in UnitedHealth’s moat as a healthcare behemoth, with diversified revenue streams from insurance premiums and Optum’s services arm.

Analysts echo this sentiment, albeit cautiously. Oppenheimer recently trimmed its price target to $325, citing the reset, but maintained a buy rating—implying over 30% upside from current levels. Broader Wall Street consensus, per Investing.com, pegs the stock as a ‘Buy’ with an average rating of 1.8, though tempered by the guidance miss. Hemsley’s pledge to rectify mistakes resonates, particularly against a backdrop of industry-wide cost pressures that have insurers scrambling. If UnitedHealth navigates this, the projected earnings rebound could revalue shares toward that historical 20x multiple, potentially lifting the price to $320 or beyond on the $16 EPS base.

Backward Glance: From Peak to Trough

Rewind to early 2025: UnitedHealth traded north of $600, buoyed by pre-revision optimism for up to $30 in adjusted EPS. The subsequent guidance suspension in May, tied to leadership changes and cost overruns, triggered a 10% premarket plunge and a broader sell-off. Fast-forward to now, with shares dipping to a 52-week low of $247.75 intraday, the reset feels complete. Historical EPS growth—averaging 14% annually over the past decade—supports the case for mean reversion, especially as the company anticipates $445.5 billion to $448 billion in 2025 revenue, a modest uptick from prior years despite headwinds.

Investors eyeing this switch are not alone; posts on X reflect growing chatter around UnitedHealth’s undervaluation, with some highlighting buyback potential at these levels. At sub-12x earnings in spots earlier this year, repurchases would indeed be accretive, amplifying long-term shareholder value. The dry irony? A company insuring millions against health risks now offers portfolio insurance against overpaying for growth.

Risks and the Road to 2026

Of course, confidence is not certainty. The 2025 outlook, while reinstated, remains conservative—net earnings of at least $14.65 per share, factoring in persistent medical cost inflation and Medicare pressures. If costs do not abate, that $16 adjusted figure could prove elusive, pressuring margins further. UnitedHealth’s medical care ratio’s deterioration signals broader industry woes, as noted in AP News coverage of the earnings shortfall.

Yet, Hemsley’s forward-looking comments point to 2026 as the inflection year, with earnings growth resumption. Company guidance, per its July 29 release, anticipates this pivot, aligning with analyst models that forecast a rebound. An AI-modelled projection, grounded in historical recovery patterns post-cost spikes (e.g., 2020’s pandemic hit), suggests EPS could climb 15-20% in 2026 from the 2025 base, assuming normalised ratios around 85%. That is speculative, but it underscores the asymmetry: downside seems priced in, while upside hinges on execution Hemsley vows to deliver.

Strategic Rotation in Context

Shifting from a high-multiple disruptor to a beaten-down leader like UnitedHealth is not just about multiples; it is about betting on resilience. Hims & Hers, with its telehealth boom and 254% 52-week gain, faces execution risks in a crowded field, trading at a P/E of 63.56 on current-year EPS estimates of $1.04. UnitedHealth, conversely, boasts a price-to-book of 2.26 against a book value of $110.41, hinting at underlying asset strength even if earnings wobble short-term.

Volume tells a story too: UnitedHealth’s 27 million shares traded recently dwarf its 10-day average of 18.7 million, indicating capitulation or accumulation. For those selling winners to fund this dip, the maths aligns—$250 buys a slice of a $226 billion market cap giant projecting steady, if subdued, growth. As one seasoned observer might quip, in healthcare investing, sometimes the best medicine is patience with the undervalued incumbent.

Outlook and Investor Implications

Ultimately, this rotation underscores a market shifting from speculation to fundamentals. UnitedHealth’s 2025 EPS floor at $16, coupled with CEO assurances, positions it as a recovery candidate trading at a generational discount. While near-term volatility lingers—evident in the stock’s 16.7% drop over the past 50 days— the setup favours those willing to endure for 2026’s promised upswing. Investors considering similar moves should weigh the CEO’s confidence against ongoing cost risks, but at 15x forward earnings, the margin of safety feels robust.

References

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Ainvest. (2025, July). UnitedHealth Group earnings fall 19%, medical costs surge, Optum disappoints in Q2 2025. Retrieved from https://www.ainvest.com/news/unitedhealth-group-earnings-fall-19-medical-costs-surge-optum-disappoints-q2-2025-2507

AP News. (2025, July 29). UnitedHealth profit tumbles 19% as soaring medical costs hit the health insurance giant. Retrieved from https://apnews.com/article/unitedhealth-second-quarter-health-insurers-4189fae975e4ee1c0aac88ed11b8dcf4

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UnitedHealth Group. (2025, July 29). UnitedHealth Group Reestablishes Full-Year Outlook and Reports Second Quarter 2025 Results. Retrieved from https://www.unitedhealthgroup.com/newsroom/2025/2025-07-29-unh-reestablishes-full-year-outlook-and-reports-second-quarter-2025-results.html