Shares of UniteHealth Group (UNH 0.62%) shot up 36.9% in April, according to data from S&P Global Market Intelligence. The largest healthcare company in the United States rebounded nicely after posting better-than-expected first-quarter earnings, with upbeat guidance and significant margin improvement compared with years prior.
Health insurers went through the spincycle the last couple of years, but if this report by UnitedHealth is any indication, a recovery is near. Here's why UnitedHealth Group stock roared in April, and whether you should consider buying shares today.
NYSE: UNH
Key Data Points
Profit turnaround, better loss ratios
In Q1, UnitedHealth's medical loss ratio for its insurance operations was 83.9%, down from 84.8% in Q1 a year prior. For a health insurer, the lower the medical loss ratio, the better, as it gives it a wider margin on its premium revenue to earn as a profit after overhead costs. Health insurers across the board faced higher utilization rates in 2025, crushing medical loss ratios. It now looks like UnitedHealth is on the other side of these cost headwinds after repricing insurance plans.
This led to stable operating earnings of $9 billion for UnitHealth in the quarter, which did not grow due to overhead cost increases across the business. One of the reasons for UnitedHealth's stock collapse over the past few years -- shares are still down 42% from all-time highs -- is its collapsing operating margin. EBIT margin is still just 3.24% over the last twelve months, down from 8% a few years ago, but changing medical loss ratios and management commentary suggest a recovery may be in order.
Management's guidance reflects this optimism, increasing its guidance for earnings per share (EPS) to at least $18.25 comapred to a floor of $17.75 previously.
Image source: Getty Images.
Time to buy UnitedHealth stock?
At a stock price of $364, UnitedHealth trades at a forward price-to-earnings ratio (P/E) of 20. This may not seem that cheap, but any smart investor knows a stock is not worth just what it will earn this year; it's worth what it will earn over the long term.
Healthcare costs generally rise faster than inflation due to the aging U.S. population. Combined with UnitedHealth potentially returning to its previous profit margin of 8% and a new share buyback program, I believe it is plausible that the stock's EPS will be triple what it is today a few years down the line. That would bring the forward P/E ratio well below 10, and make the stock a screaming buy right now.
