An old country song morbidly titled "Gloom, Despair, and Agony on Me" included the lyrics, "If it weren't for bad luck, I'd have no luck at all." This might be an apt motto for UnitedHealth Group (UNH -6.26%) these days.
The healthcare giant continued to disappoint investors with its 2025 second-quarter update, revealing that full-year earnings will be worse than expected. The U.S. Department of Justice (DOJ) is conducting an investigation of UnitedHealth related to its Medicare billing practices, and its share price has plunged nearly 60% from the peak set in late 2024.
UnitedHealth Group stock is a decidedly unpopular pick. However, here are five reasons why buying this beaten-down stock could be a brilliant move.
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1. The company has a plan to address its problems
It would be one thing if UnitedHealth Group's challenges were insurmountable, but they're not. The company has a clear and compelling plan to address its problems.
UnitedHealth didn't anticipate how hard it would be hit by rising medical costs, especially with its Medicare Advantage plans. The most effective solution to this issue is simple: Raise premiums.
That's exactly what UnitedHealth plans to do, but it has to wait until the beginning of next year for most premium hikes to take effect. Since commercial plans renew throughout the year, the company can implement premium changes more quickly with this line of business.
Tim Noel, the new CEO of the UnitedHealthcare insurance business, said in the Q2 earnings call that his unit will have "strongly responsive pricing for 2026." That's not the only step the company is taking, though.
Noel stated that UnitedHealthcare has "stepped up our audit clinical policy and payment integrity tools to protect customers and patients from unnecessary costs." He added that the business is also streamlining its provider networks, especially for Medicare Advantage plans.
UnitedHealth Group's Optum segment isn't performing as well as desired, either. Again, though, the company is implementing a plan to fix the problems. Optum CEO Patrick Conway said in the Q2 call that price increases are coming to reflect high patient acuity and risk. He also mentioned that Optum Health will discontinue serving around 200,000 patients.
2. Cost-cutting should boost the bottom line
UnitedHealth Group is also moving forward with cost-cutting initiatives to boost its bottom line. CEO Stephen Hemsley referred to "meaningful cost opportunities within the enterprise" in his comments during the Q2 call, adding, "[W]e are pursuing them with urgency."
Noel highlighted his unit's efforts to scale artificial intelligence (AI) across health plan operations, which should generate cost savings while improving patient and provider experiences. Conway expects Optum Health to deliver nearly $1 billion in cost savings in 2026.
3. Long-term growth prospects remain strong
Despite UnitedHealth's challenges over the near term, its long-term growth prospects remain strong. The company expects to return to earnings growth next year. Hemsley predicts that earnings growth will accelerate in 2027 and beyond.
Is this upbeat assessment merely the result of a CEO looking through rose-colored glasses? I don't think so. The consensus among analysts surveyed by LSEG is that UnitedHealth Group will deliver solid year-over-year earnings growth in 2026.
4. An experienced, steady hand is now at the wheel
It's also important for investors to remember that UnitedHealth Group once again has an experienced, steady hand at the wheel. Hemsley returned to run the company two months ago. He previously served as CEO from 2006 to 2017, a period during which UnitedHealth Group flourished and its share price soared.
5. The stock is a bargain
Last, but not least, UnitedHealth Group stock is a bargain. Its shares trade at a forward price-to-earnings ratio of below 11.6. That's not much higher than the valuation during the financial crisis of 2008 and 2009.
Does the DOJ investigation justify such a low earnings multiple? I don't think so. UnitedHealth survived a previous lengthy investigation, with a court-appointed Special Master ultimately concluding that there wasn't evidence that the company had done anything wrong.
Independent audits from the Centers for Medicare and Medicaid Services show that UnitedHealth's Medicare practices are, in the company's words, "among the most accurate in the industry." UnitedHealth Group insists that it "has full confidence in its practices."
