For years UnitedHealth Group (UNH 0.31%) has normally been a reliable dividend stock. But an abysmal start to 2025 has wiped out many of the gains that investors have achieved in recent years, with its five-year return now in negative territory.
Year to date, the stock has fallen by nearly 45%, which is by no means normal for the healthcare stock. In fact, this is the worst it has performed since the Great Recession, when it tumbled by more than 54% in 2008.
The big questions many investors are likely asking today are: Can it recover? Or is there more of a downfall to come for this once seemingly unstoppable stock?
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Big declines aren't the norm for UnitedHealth
The past few years haven't been all that great for UnitedHealth, but by and large, this has been a fairly strong stock to own. It has typically outperformed the market. And outside of 2024 -- when it was down 4% -- the last time it finished a year in the red was (as noted) back in 2008, when the U.S. economy was in the midst of the Great Recession and the stock lost more than half of its value.
Not only has UnitedHealth normally been a safe stock, it's also been a tremendous growth stock. Consider that if you invested $10,000 into its shares at the end of 2003, then 20 years later your investment would have been worth $181,000.
But if you hung on until now, that investment would have fallen to a value of $101,000. While that's still a good return, it spotlights just how significant the decline has been this year, for a stock that's typically known for being a solid long-term investment. Still, the past doesn't predict the future.
Why the company might face a tough road ahead
The problem with UnitedHealth right now is that it's facing many challenges. Medical costs are up, and there's a lot of uncertainty in healthcare as the federal government looks to cut costs. Meanwhile, the Department of Justice is reportedly looking into UnitedHealth's billing practices.
The danger is that the company may face financial repercussions and other headwinds, such as having to change its practices -- or at the very least, incurring higher-than-typical costs due to greater utilization rates. The latter, however, may be a shorter-term trend.
Either way, this is a business known for consistently growing its operations, and that may not be a sure thing anymore. While UnitedHealth generated a healthy profit of more than $14.4 billion on revenue of $400.3 billion in 2024, investor concerns about long-term growth appear to be weighing on the stock. In May, the company suspended its outlook for the year; it also announced a change in CEO, with Andrew Witty stepping down for personal reasons and former CEO Stephen Hemsley taking over.
Should you buy UnitedHealth stock today?
While UnitedHealth stock has done well in previous years, that doesn't mean that it's a surefire bet to rebound soon.
The good news is that it still has solid fundamentals. Since it's a key health insurer in the U.S., I'd be hesitant to count it out in the long run. There's some near-term risk and even some long-term uncertainty about how all the changes in the healthcare industry might pan out.
But the stock is trading at levels it hasn't been at since 2020, and its valuation is just 12 times its trailing earnings. I think that gives it a good enough margin of safety at its current price, and that buying it today might prove to be a solid move. As long as you're willing to be patient, this can be a good stock to buy and hold.
