Key Takeaways
- UnitedHealth Group has achieved a 14% compound annual EPS growth over the past decade, surpassing industry norms.
- Despite earnings strength, the stock trades at an 8.8x EV/EBIT multiple — well below its 10-year historical average.
- Optum continues to underpin operating margins, accounting for over 40% of earnings and offsetting healthcare cost volatility.
- Forward guidance implies potential EPS rebound in 2026, with forecast revenue between $445.5–448 billion.
- Risks remain from higher medical cost ratios and cyber-related impairments — yet valuation may discount these too steeply.
UnitedHealth Group, a dominant force in the US healthcare sector, has consistently delivered robust earnings growth over the past decade, with earnings per share compounding at an annual rate of 14%. This track record, juxtaposed against its current enterprise value to EBIT ratio of 8.8 times, raises intriguing questions about whether the market is fully appreciating the company’s resilient business model amid broader industry headwinds.
Decade of Steady Earnings Expansion
Over the last 10 years, UnitedHealth Group has achieved a compound annual growth rate (CAGR) in earnings per share (EPS) of 14%, underscoring its ability to navigate regulatory shifts, economic cycles, and competitive pressures in the healthcare landscape. This growth stems from a diversified operation spanning insurance, pharmacy benefits, and health services through its UnitedHealthcare and Optum segments. Historical data shows that from 2015 to 2024, the company’s EPS rose from approximately $6.01 to $23.11 on a trailing twelve-month basis, reflecting disciplined cost management and strategic acquisitions.
Such expansion is not merely a product of revenue scaling but also of margin improvements. For instance, UnitedHealth’s operating margins have hovered around 8–9% in recent years, bolstered by efficiencies in its Optum division, which leverages data analytics and technology to optimise healthcare delivery. Analysts attribute this EPS trajectory to the company’s scale advantages, allowing it to absorb rising medical costs while expanding membership. In the second quarter of 2025, revenue reached $111.6 billion, up 13% year-over-year, driven by membership growth and premium adjustments, even as net income dipped due to elevated medical loss ratios.
Contextualising the Growth Drivers
Several factors have fuelled this EPS CAGR. UnitedHealth’s UnitedHealthcare arm, the largest US health insurer, benefits from an ageing population and increasing demand for managed care services. Membership in its Medicare Advantage plans, for example, has grown steadily, capitalising on favourable demographics. Meanwhile, Optum’s focus on value-based care models has enabled cost containment, contributing to earnings stability.
Looking at broader trends, the healthcare sector has seen EPS growth rates averaging around 10–12% for large-cap peers over similar periods, making UnitedHealth’s 14% figure a standout. This outperformance aligns with multi-year trends in healthcare spending, which rose at a CAGR of about 5% in the US from 2010 to 2020, per historical Centers for Medicare & Medicaid Services data. However, 2025 has introduced challenges, including higher-than-expected medical costs and cyber-related disruptions, which temporarily pressured profitability.
Valuation Through the EV/EBIT Lens
At an EV/EBIT multiple of 8.8 times, UnitedHealth appears attractively priced relative to its historical averages and sector benchmarks. Enterprise value (EV) accounts for the company’s market capitalisation of approximately $229 billion, plus net debt, divided by earnings before interest and taxes (EBIT). This metric, often favoured for its holistic view of operational profitability, suggests the stock trades at a discount compared to its 10-year average multiple of around 15–18 times.
To put this in perspective, the S&P 500 healthcare sector index typically commands EV/EBIT ratios in the 12–15x range for established players. UnitedHealth’s current figure implies a potential undervaluation, especially given its projected EPS growth. Forward estimates peg 2025 EPS at $16.23, with analysts forecasting a rebound to $29.90 in the subsequent year, implying a forward price-to-earnings ratio of 8.44 times based on the latest closing price of $252.37.
Metric | Value | Historical Context |
---|---|---|
10-Year EPS CAGR | 14% | Outpaces sector average of 10–12% |
EV/EBIT | 8.8x | Below 10-year average of 15–18x |
Trailing Twelve-Month EPS | $23.11 | Up from $6.01 in 2015 |
Forward P/E | 8.44x | Discount to historical 20–25x |
Market Capitalisation | $229 billion | As of latest session close |
This valuation disconnect may stem from short-term concerns, such as the medical cost ratio climbing to 89.4% in Q2 2025, up from prior quarters, reflecting inflationary pressures in healthcare delivery. Yet, for long-term investors, the 8.8x EV/EBIT could signal an entry point, assuming the company regains margin traction.
Comparative Analysis with Peers
Comparing UnitedHealth to rivals like CVS Health or Humana reveals a similar pattern of compressed multiples amid sector-wide cost pressures. CVS, for instance, trades at an EV/EBIT of around 10x, despite slower EPS growth. Humana’s focus on Medicare has yielded a 12% 10-year EPS CAGR but at higher valuations. UnitedHealth’s edge lies in its diversified revenue streams, with Optum contributing over 40% of operating earnings in recent years, providing a buffer against insurance cyclicality.
Analyst models, such as those from Morningstar, project UnitedHealth’s normalised EV/EBIT to revert to 12–14x over the next three years, implying potential upside if EPS growth sustains at 10–15% annually. This forecast is labelled as analyst consensus, drawing from revised 2025 guidance of $445.5–448 billion in revenue and adjusted EPS of $16.00–16.50.
Implications for Investors
The combination of a 14% 10-year EPS CAGR and an 8.8x EV/EBIT multiple highlights UnitedHealth as a potential compounder in a defensive sector. Investors should weigh this against risks like regulatory scrutiny on Medicare Advantage reimbursements and ongoing cyber recovery costs, which shaved $1.1 billion from Q1 2025 earnings.
- Growth Resilience: Despite a 60% drop from its 52-week high of $630.73, the stock’s fundamentals remain intact, with average daily volume of 20.7 million shares over three months indicating liquidity.
- Sentiment Snapshot: Credible sources like Seeking Alpha report positive analyst sentiment on membership growth, with projections for double-digit revenue increases through 2025, explicitly marked as buy-rated views.
- Risk Factors: Elevated medical costs could cap near-term EPS, but historical data shows UnitedHealth’s adeptness at pricing adjustments.
In a market where growth stocks often command premiums, UnitedHealth’s metrics suggest a rare blend of quality and value. If margins normalise, as per company guidance, the stock could see re-rating, rewarding patient holders. Dryly put, in healthcare investing, sometimes the best medicine is time – and a discounted entry multiple.
Broader Sector Trends in 2025
The healthcare sector in 2025 has faced volatility, with the S&P 500 healthcare index down 25% despite 86% of firms beating earnings forecasts. Trends point to AI-driven cost efficiencies and membership resilience, yet multiples remain suppressed. UnitedHealth’s profile fits this narrative, trading at a forward P/E of 8.44x against a historical industry average of 20.7x.
Looking ahead, analyst-led forecasts from sources like Yahoo Finance anticipate sector EPS growth of 8–10% in 2026, with UnitedHealth potentially leading via its Optum innovations. This positions the company well for sustained value creation, provided it addresses cost pressures effectively.
References
- UnitedHealth Group. (2025). Financial Reports. https://www.unitedhealthgroup.com/investors/financial-reports.html
- Macrotrends. (2025). UnitedHealth Group Revenue Chart. https://www.macrotrends.net/stocks/charts/UNH/unitedhealth-group/revenue
- Fortune. (2025, July 31). UnitedHealth Group Earnings Leadership Outlook. https://fortune.com/2025/07/31/unitedhealth-group-earnings-leadership-outlook/
- Yahoo Finance. (2025). UNH Quote. https://finance.yahoo.com/quote/UNH/
- PitchBook. (2025). UnitedHealth Group Company Profile. https://pitchbook.com/profiles/company/12752-20
- UnitedHealth Group. (2025, April 17). Q1 Results and Revised Guidance. https://www.unitedhealthgroup.com/newsroom/2025/2025-04-17-uhg-reports-first-quarter-results-and-revises-full-year-guidance.html
- UnitedHealth Group. (2025, January 16). Q4 2024 Results. https://www.unitedhealthgroup.com/newsroom/2025/2025-16-01-uhg-reports-fourth-quarter-results.html
- Seeking Alpha. (2025). Membership Growth Versus Cost Pressure. https://seekingalpha.com/article/4811931-unitedhealth-group-membership-growth-resilience-rising-medical-cost-pressure
- Yahoo Finance. (2025). UNH Q2 2025 Results. https://finance.yahoo.com/news/unitedhealth-group-second-quarter-2025-123838036.html
- TradingView. (2025, August 6). Financial Results and Outlook. https://www.tradingview.com/news/tradingview:987b628d0bee8:0-unitedhealth-group-q2-2025-financial-results-and-outlook/
- CNBC. (2025, July 29). UNH Q2 2025 Earnings Report. https://www.cnbc.com/2025/07/29/unitedhealth-group-unh-earnings-report-q2-2025.html
- UnitedHealth Group. (2025, July 29). Q2 Results and Full-Year Outlook. https://www.unitedhealthgroup.com/newsroom/2025/2025-07-29-unh-reestablishes-full-year-outlook-and-reports-second-quarter-2025-results.html
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