Is it Time to Buy the Dip in UnitedHealth Group?
May 20, 2025 | InsiderSentiment.com Team
UnitedHealth Group (UNH) has serious problems. In February 2025, it was revealed that its Medicare billing practices are under investigation. Its pharmacy benefits unit, OptumRx is under investigation for possible overbilling Medicare. Apparently, criminal charges may be in the offing for Medicare fraud for its Medicare Advantage business. UNH is also dealing with an antitrust lawsuit from DOJ regarding its $3.3 billion attempted takeover of home health care provider, Amedysis. Finally, in May, the company announced that its CEO, Andrew Witty would step down for personal reasons.1
In line with its compounding problems, UNH's stock price has declined by about 50% over the past five weeks. The question is whether 50% haircut sufficiently accounts for all of its problems and whether this may represent a good buying opportunity.
Recent Stock Performance
The recent stock prices for UNH are shown below. When UNH’s problems were first aired in February, the stock price declined by about 15%, from around $530 to $460. After that however, the price fully recovered and climbed over $600 at the beginning of May. Following the most recent revelations the stock price crashed by over 50%. The current stock price is approximately $305 at the time of writing.
To address the question of whether to buy the dip, we first conduct a fundamental analysis on UNH. We then follow this up by looking at the recent insider trading information. Our conclusions follow.
Fundamentals
UNH’s recent financial performance is shown below. UHN has been showing a steady decline in financial performance over the last year: Its sales growth rate has fallen by 47% from 14.6% per annum in 2023 to 7.7% per annum in 2024, while its cost of goods sold has increased from 10.4% of revenues to 11.7% of revenues. SGA is pretty constant while its non-operating income has turned negative 2.1% of revenues. First Quarter of 2025 shows a modest improvement in sales growth to 9.8% on an annual basis and a gross margin of about 8.2%.2
Using business-as-usual assumptions reflecting most recent historical performance levels gives us an intrinsic value of $240, which is still $50 below the most recent stock price. Using more generous assumptions going forward (e.g., sales growth rises back to 11%, cost of goods sold falls to 10.4%, and non-operating expenses are eliminated,) we estimate the intrinsic value of UHN to be around $330. Hence, on the fundamentals, there is possibly about a 10-15% upside from the current level of stock prices if performance improves, but this is not huge.
Insider Activity
Recent insider trading patterns for UNH are shown below: What stands out is a large open market purchase of 86,700 shares on May 16, 2025 by Stephen Hemsley, CEO of UHG. The market value of this purchase is about $25 million. This is certainly a solid vote of confidence in UNH and bodes well for some recovery in UNH stock price. President and CFO John Rex purchased over 17,000 shares on the same day, another strong vote of confidence. There were three other smaller purchases by directors that occurred in the same time frame, which is noteworthy.
