What is UNH's Intrinsic value?

UnitedHealth Group Inc (UNH) Intrinsic Value Analysis

Executive Summary

As of May 23, 2025, UnitedHealth Group Inc's estimated intrinsic value ranges from $242.17 to $263.80 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Dividend Discount Model (Multi-Stage) $242.17 -18.4%
Dividend Discount Model (Stable) $263.80 -11.1%

Is UnitedHealth Group Inc (UNH) undervalued or overvalued?

With the current market price at $296.67, the stock appears to be moderately overvalued.

Understanding Intrinsic Value

Intrinsic value represents the "true" worth of a company based on its fundamentals rather than market sentiment. We've employed multiple methodologies to triangulate UnitedHealth Group Inc's intrinsic value, including:

  1. Dividend Discount Model (DDM): Values the company based on expected future dividend payments

Weighted Average Cost of Capital (WACC)

The cost of capital is a critical factor in valuation models, representing the required return for investors.

WACC Component Low High
Long-term bond rate 3.9% 4.4%
Equity market risk premium 4.6% 5.6%
Adjusted beta 0.84 0.94
Cost of equity 7.7% 10.1%
Cost of debt 5.0% 5.0%
Tax rate 21.2% 22.6%
Debt/Equity ratio 0.29 0.29
After-tax WACC 6.9% 8.7%

Valuation Methods

2. Dividend Discount Model (DDM)

The DDM values a company based on its expected future dividend payments. We used two approaches:

Multi-Stage DDM:

  • Current payout ratio: 34.9%
  • Stable payout ratio: 90.0%
  • Growth transition: 5 years
  • Cost of equity: 8.9%
  • Long-term growth rate: 1.0%
  • Fair value: $242.17 (-18.4% from current price)

Stable DDM:

  • Stable payout ratio: 70% (Low) to 90% (High)
  • Cost of equity: 10.1% (Low) to 7.7% (High)
  • Long-term growth rate: 0.5% (Low) to 1.5% (High)
  • Fair value range: $177 to $351
  • Selected fair value: $263.80 (-11.1% from current price)

Key Financial Metrics

Metric Value
Market Capitalization $270035M
Enterprise Value $317015M
Trailing P/E 12.22
Forward P/E 16.71
Trailing EV/EBITDA 0.00
Current Dividend Yield 290.40%
Dividend Growth Rate (5Y) 13.22%
Debt-to-Equity Ratio 0.29

Investment Decision Framework

To determine the most reliable intrinsic value estimate, we weigh each valuation method based on:

  1. Forecast Certainty: DCF methods rely on long-term projections, while earnings power value focuses on current normalized earnings
  2. Business Model Alignment: Dividend models are more appropriate for mature companies with established dividend policies
  3. Historical Accuracy: How well each method has predicted fair value historically

Valuation Weight Matrix

Valuation Method Weight Weighted Value
Dividend Discount Model (Multi-Stage) 57% $48.43
Dividend Discount Model (Stable) 43% $39.57
Weighted Average 100% $251.44

Investment Conclusion

Based on our comprehensive valuation analysis, UnitedHealth Group Inc's weighted average intrinsic value is $251.44, which is approximately 15.2% below the current market price of $296.67.

Key investment considerations:

  • Conservative capital structure (Debt/Equity of 0.29)
  • Historical dividend growth of 13.22%

Given these factors, we believe UnitedHealth Group Inc is currently moderately overvalued with the potential for long-term appreciation based on the company's growth trajectory and financial strength.