UNH is a buy; management's margin recovery and raised FCF estimates support ~40% upside in 12-18 months.

2025 was a very bad year for UnitedHealth, as the company's management team underestimated the cost of customer service. At the end of the year and the beginning of 2026, the management team made several adjustments to comply with current conditions.

As analysts, we were expecting certain results as a result of those adjustments. The results turned out to be better than expected. Today, I have raised my estimates for the company's free cash flow to adapt to these better conditions.

So, does this make UnitedHealth a better buying opportunity? Let's take a look and answer this question together after I have made these adjustments.

It is important to note that UnitedHealth is one of the largest , if not the largest, healthcare companies in the world, with revenues of $450 billion over the past twelve months.

This is even after some adjustments made by the management team.

You mentioned that customer service costs were higher than management had anticipated in 2025, and that rate of increase is likely to continue. Therefore, the company took a closer look at its customer base and decided that some customers were too expensive to service, and they were unable to make a profit from them, so they chose to exit some markets .

They also opted to conduct some divestments, selling a Florida healthcare unit to a private equity firm.

So, the business may be smaller in terms of total revenue or total customers, but I believe this was the wise move to make. In addition to exiting some markets, the company has increased insurance prices. This was the case everywhere.

However, even after those measures, the company’s operating profit margin is unlikely to return to pre-2025 levels until 2027 or 2028, most likely, according to the management team.

But progress is much better than expected, and this is one of the main reasons that led me to raise my expectations regarding free cash flow. The company’s operating profit margin was at its highest level in 2020, not even exceeding 10%.

Therefore, despite popular opinion, the healthcare group , and UnitedHealthcare's business, is not very profitable when measured by operating profit margin . But when measured by total profits, it may seem very profitable, doesn't it?

A profit margin of 5 % on revenues of $400 billion equals $20 billion. That's a huge number. But when viewed as a percentage , it is one of the least profitable businesses of this size.

Its return on invested capital is not as profitable, amounting to 8% over the past twelve months. At its peak, the percentage was around 16%.

Now, this is not considered a high- risk business when measured by weighted average cost of capital or by the "beta" coefficient, which measures the stock price's performance relative to the S&P 500 index.

But the variance in earnings has been significant in recent years, hasn't it? We witnessed that major shift in 2025 with the collapse of profits and profit margins.

This is not what usually happens with UnitedHealth , which has a clear vision of its business, and the company usually does a good job of estimating the cost of customer service and pricing policies accordingly.

But 2025 was a major setback, and they are working to address this setback and are making great progress.

Therefore, based on the forward price-to-earnings ratio , the stock is now trading at 16.5, which is still at the lower end of the range in which the stock has traded according to this metric over the past years.

Therefore, given the better-than- expected improvement in net profit, I have revised my estimates for the amount of free cash flow I expect the company to generate over the next several years.

I have increased my estimates by several billion dollars, about $3 billion per year starting in 2026 and beyond.

This had the effect of increasing the intrinsic value of the stock to $518. Therefore, despite the rapid recovery in the share price, I still see potential for a 39% or nearly 40% rise for UnitedHealth over the next 12 to 18 months.

So, this is one of those stories that was indeed a buying opportunity on the dip. When the stock price crashed in 2025, I made several videos throughout 2025 and early 2026 asserting that I felt UnitedHealth stock looked like a buying opportunity.

Those videos were recorded when the stock price was around $230, $ 240, $250, $270 and $280. And all the while I kept repeating the purchase classification . This is one of the cases where things worked effectively.

So, to answer the question, do I still think UnitedHealth Group stock represents a buying opportunity? Yes, I do think so . I think there is still room for further gains . I believe there is room for management to improve operations, and I believe investors can benefit from this upswing.