Is the Worst Over for UnitedHealth Group Stock?

Key Points

• UnitedHealth has been in a tailspin this year as the company's performance has fallen well short of analyst expectations.

• The company, however, recently reaffirmed its guidance for the year, suggesting that perhaps there is finally some more stability ahead.

• 10 stocks we like better than UnitedHealth Group ›

The problem with trying to buy a stock at its low is that you'll only know whether it has bottomed out after it has done so. When it's in the midst of a sell-off, it's impossible to know how low it'll end up going, until well after it has hit a low and has stabilized.

UnitedHealth Group (NYSE: UNH) stock has been falling sharply this year, hitting new lows along the way. Recently, however, it has been rallying and it looks to be in better shape. What's behind the stock's recent surge in value, and could it be confirmation that it's safe to buy it right now?

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Is UnitedHealth's business finally showing signs of stability?

The leading health insurance company has been battling multiple headwinds over the past several months, including a change in CEO and underwhelming quarterly results. But a few weeks ago it revealed an encouraging outlook for the year ahead.

For 2026, the company expects, based on a preliminary review, that approximately 78% of its members will be in highly rated Medicare plans (at least four stars). Being on high-rated plans ensures larger payments from the government. And in announcing the reassuring forecast, that gives investors some confidence that the business is on the right track.

UnitedHealth also reaffirmed its adjusted earnings per share forecast for 2025. In July, it said its adjusted per-share profit will be at least $16. While that was well below Wall Street estimates of nearly $21, being on track to still meet its current guidance is at least a positive sign that perhaps things may not be getting any worse for the healthcare company.

The stock has been doing well since receiving an investment from Berkshire Hathaway

UnitedHealth has already been performing fairly well since mid-August, when investors learned that Berkshire Hathaway bought 5 million shares of the business. The company, which Warren Buffett runs, focuses on value stocks and takes advantage of opportunities where valuations are low. That prompted many investors to follow suit and also buy shares of UnitedHealth, prompting a bit of a rally.

Before the news, the healthcare stock was hovering around $270, and as of the end of last week, it closed at more than $336. UnitedHealth has been doing well since then and the latest developments suggesting that things have stabilized could provide investors with further reassurance that the stock's sell-off may finally be over.

UnitedHealth has reported $21.3 billion in profit over the trailing 12 months and remains a strong blue chip stock.

Has UnitedHealth stock bottomed out?

Even with the stock's recent rally, UnitedHealth remains down more than 40% over the past 12 months. It's trading at close to 15 times its trailing earnings and is still a fairly cheap stock to own.

The good news is that with a lot of negativity effectively priced into the stock, there may not be a whole lot more downside risk at this point. Of course, it's always possible that the stock goes lower, but I don't think it's all that probable. Unless there's a concerning new development around the business, I believe it may indeed have bottomed out when it reached a low of $234.60 earlier this year. I don't expect it'll get to those lows again as the market arguably overreacted to a flurry of bad news surrounding the business.

If you're a long-term investor, now can be a great time to load up on UnitedHealth's stock, especially with its dividend yield being an attractive rate of 2.6%,which is higher than the S&P 500's average of only 1.2%.

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David Jagielski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Berkshire Hathaway. The Motley Fool recommends UnitedHealth Group. The Motley Fool has a disclosure policy.