Is UnitedHealth a Millionaire Maker?

There is a ton of money in America's healthcare system. The country's annual healthcare expenditures push $5 trillion, representing nearly a fifth of the world's largest economy. UnitedHealth (NYSE: UNH) has generated life-changing returns as one of the industry's most powerful companies.

At its peak in late 2024, the stock had returned over 60,000% since 1990. That turns each invested dollar into over $600.

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But as you may know, the company and stock have plunged into uncertainty after the high-profile slaying of the CEO of the company's insurance and managed care arm, UnitedHealthcare, in December, and numerous setbacks since then, some potentially criminal.

It's a conundrum for investors deciding whether UnitedHealth can replicate its past success once the dust settles, or if this is a broken business to avoid. I looked under the hood to gauge whether UnitedHealth can still make investors rich.

Image source: Getty Images.

Recapping UnitedHealth's multifaceted downfall

UnitedHealth operates the largest health insurer in the United States, UnitedHealthcare. While the stock has shed over half its value since the tragic death of UnitedHealthcare's CEO, the parent company's troubles stretch far beyond.

Patients enrolled in UnitedHealth's Medicare Advantage plans are seeking more care than UnitedHealth had forecasted, unexpectedly raising costs. Management revised its 2025 guidance in first-quarter earnings in April, then withdrew guidance altogether in May after these trends continued.

Additionally, UnitedHealth is facing some serious allegations of unethical business practices. Reports emerged that the U.S. Department of Justice is investigating the company for possible Medicare fraud. Another report alleged that UnitedHealth secretly paid care facilities to deny hospital transfers and other services to patients it covered.

Weighing clear competitive advantages against increasing uncertainty

It creates a complicated situation for investors, who must try to piece together answers for questions like:

• Are there any other allegations, investigations, or other controversies that aren't public yet?
• Is the company guilty of these existing allegations?
• If so, how much can investors trust the company's past business performance?

The logical investment thesis for UnitedHealth is that it remains one of the most powerful players in a multitrillion-dollar healthcare system. It boasts unmatched size, with over $410 billion in annual revenue, and owns multiple components of the healthcare system. For example, it serves as both an insurer and a pharmacy benefits manager (PBM), affording it tremendous leverage over suppliers, providers, and patients.

UnitedHealth could face substantial fines, and some employees may even face imprisonment if investigations find that criminal activity occurred in the company's dealings. However, barring the government stepping in and forcing UnitedHealth to break apart, its core competitive advantages (size and vertical integration) are likely to remain intact.

Is UnitedHealth a millionaire maker?

Approaching with caution is wise in such a situation where it's unclear to what degree, or for how long, all of UnitedHealth's issues may impact the business and stock.

Analysts have dramatically lowered their long-term growth expectations, while the sliding share price has dropped the price-to-earnings ratio to under 13.

UNH EPS LT Growth Estimates data by YCharts.

At the moment, it's hard to envision UnitedHealth returning to business as usual anytime soon. Even if all the controversy goes away overnight, its medical costs are still surging. If UnitedHealth grows its earnings at a 7% annualized rate going forward, the stock's current P/E ratio appears to be a solid value, assuming no serious outcomes from any investigations or allegations.

But even if UnitedHealth returns to form, it remains a behemoth of a company with over $400 billion in annual revenue. It will be much harder to generate enough growth from its current size to turn any realistic sum for most individual investors into a fortune.

Given the entire picture here, it becomes increasingly clear that UnitedHealth's millionaire-making years are likely in the past.

Should you invest $1,000 in UnitedHealth Group right now?

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Justin Pope has no position in any of the stocks mentioned. The Motley Fool recommends UnitedHealth Group. The Motley Fool has a disclosure policy.