UNH Valuation Premium Masks Slow Revenue Growth and Commercial Pressures
UnitedHealth (UNH) stands out among its managed care peers, boasting the best operating margin and trading at a premium of more than double its earnings multiple. However, this comes with a catch: UNH has the slowest revenue growth in its group.
The company's higher-margin Optum services mix contributes to its edge in operating margins, which currently stands at 4.8%. This premium is not driven by revenue growth, as UNH's 6.5% growth over the last twelve months lags behind Cigna's 7.7%. The stock also faces pressure from commercial book medical cost trends, which are running modestly above 11%, higher than planned.
UnitedHealthcare is expected to reach at least $12 billion in operating earnings for 2026, with the majority of these earnings coming from Optum. The company has been rebuilding its pharmacy benefit business, Optum Rx, around monthly per-member fees, and management expects more than 95% of clients to be on full pass-through of manufacturer rebates by the end of 2026.
The test for investors lies in the second half of 2026, when earnings will tilt heavily toward Optum Rx and Optum Insight. UnitedHealthcare is also opening its front door wider, eliminating prior authorization volume by 30% by the end of 2026.