UnitedHealth Group IncorporatedUNHNYSE

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DCF Valuation

⚠️Model Warnings

•Terminal value represents 85% of enterprise value. Valuation highly sensitive to long-term assumptions.

DCF Valuation Summary

Strong Buy

Fair Value: $1,940.31 per share(market-calibrated)

+570.9%

Upside to Fair Value

Current

$289.21

Pure Model

$2,213.50

Fair Value

$1,940.31

Bull Case

$2,844.05

Bear Case

$1,735.76

Market Reality Check

Model Terminal Growth

3.00%

Market-Implied Growth

0.50%

Calibrated Growth

2.13%

Fair value uses 65% model / 35% market-implied terminal growth. Pure model: $2,213.50.

What's Driving This Ratingfor UNH

✓

CapEx already efficient

CapEx at 0.70% of revenue is already at or below sector maintenance level. No normalization needed — cash conversion is already strong.

↑

Margin expansion modeled

Current EBIT margin is 7.20% — below the sector mature average of 20.00%. Model expands margins as the business scales and operating leverage kicks in. Year 10 EBIT reaches $102.3B (15.80% margin).

→

Moderate revenue growth

Analyst consensus projects -1.30% revenue growth, fading to 3.00% by Year 10. Revenue reaches $647.0B (vs $447.6B today).

🎯

Market pricing in lower growth than model

The market implies only 0.50% perpetual growth — 250bps below the model's 3.00%. This suggests the market sees headwinds or risks not in the model.

✓

Strong cash flow conversion

Year 10 FCF/EBITDA conversion of 81.81% indicates efficient cash generation. FCF reaches $88.1B by Year 10 (13.62% FCF margin).

Weighted Average Cost of Capital (WACC)

Cost of Equity (CAPM)

Risk-Free Rate (Rf)4.50%

Beta (β)0.41

Market Risk Premium4.50%

*Using current implied premium (4.5% per Damodaran 2026), not historical (6.5%)

Cost of Equity (Re)6.37%

Cost of Debt

Pre-tax Cost of Debt3.80%

Tax Rate12.86%

After-tax Cost of Debt3.31%

Equity Weight (E/V)77.05%

Debt Weight (D/V)22.95%

WACC Calculation

WACC = (E/V × Re) + (D/V × Rd × (1-Tc))

WACC = (77.05% × 6.37%) + (22.95% × 3.31%)

= 5.67%

10-Year Free Cash Flow Projections(showing years 1, 3, 5, 7, 10)

Year	Year 1	Year 3	Year 5	Year 7	Year 10
Revenue	$441.7B	$482.4B	$541.7B	$586.8B	$647.0B
EBIT	$31.8B	$34.7B	$39.0B	$69.3B	$102.3B
Tax	$4.1B	$4.5B	$5.0B	$8.9B	$13.2B
NOPAT	$27.7B	$30.3B	$34.0B	$60.4B	$89.1B
+ Depreciation	$3.7B	$4.1B	$4.6B	$5.0B	$5.5B
- Capex	$3.1B	$3.4B	$3.8B	$4.1B	$4.6B
- Δ NWC	-$584M	$2.7B	$2.4B	$2.2B	$1.9B
Free Cash Flow	$28.9B	$28.3B	$32.4B	$59.0B	$88.1B
Discount Factor	0.946	0.848	0.759	0.680	0.576
Present Value	$27.4B	$24.0B	$24.6B	$40.1B	$50.8B

FCF Formula: Free Cash Flow = NOPAT + Depreciation - Capex - Change in Net Working Capital

Terminal Value Calculation

Perpetuity Growth Method

Year 10 FCF$88.1B

Terminal Growth Rate3.00%

WACC5.67%

TV = FCF₁₀ × (1+g) / (WACC-g)

Terminal Value$3.4T

PV of Terminal Value$2.0T

Exit Multiple Method

Year 10 EBITDA$107.7B

Exit Multiple (EV/EBITDA)24.0x

TV = EBITDA₁₀ × Exit Multiple

Terminal Value$2.6T

PV of Terminal Value$1.5T

Valuation Summary

Perpetuity Growth Method

PV of Projected FCFs$342.4B

PV of Terminal Value$2.0T

Enterprise Value$2.3T

(-) Net Debt$54.0B

Equity Value$2.3T

Shares Outstanding910M

Price per Share$2,472.74

Exit Multiple Method

PV of Projected FCFs$342.4B

PV of Terminal Value$1.5T

Enterprise Value$1.8T

(-) Net Debt$54.0B

Equity Value$1.8T

Shares Outstanding910M

Price per Share$1,954.26

Pure Model Fair Value

$2,213.50

Average of perpetuity growth and exit multiple methods (before market calibration)

Sensitivity AnalysisPrice per Share

WACC ↓ / Growth →	2.00%	2.50%	3.00%	3.50%	4.00%
3.67%	$2,985.24	$2,857.37	$2,735.59	$2,619.59	$2,509.07
4.67%	$2,414.52	$2,692.50	$2,735.59	$2,619.59	$2,509.07
5.67%	$1,911.92	$2,038.90	$2,213.50	$2,468.68	$2,509.07
6.67%	$1,595.64	$1,665.31	$1,753.97	$1,870.63	$2,031.03
7.67%	$1,370.72	$1,413.26	$1,464.92	$1,528.97	$1,610.49

How to read: This table shows how the valuation changes with different WACC (discount rate) and terminal growth rate assumptions. Green = undervalued, Red = overvalued.

Scenario Analysis

Bear Case

$1,735.76

500.2% vs current

• -25% vs analyst consensus
• Terminal growth: 2.5%
• Beta: 0.52

Base Case

$2,213.50

665.4% vs current

• Analyst consensus
• Terminal growth: 3.0%
• Beta: 0.41

Bull Case

$2,844.05

883.4% vs current

• +25% vs analyst consensus
• Terminal growth: 3.5%
• Beta: 0.35

Key Assumptions & Drivers✓ Using Analyst Consensus Estimates• Healthcare Sector

Growth Assumptions (Select Years)

Year 1 Revenue Growth-1.30%

Year 3 Revenue Growth5.86%

Year 5 Revenue Growth4.54%

Year 7 Revenue Growth3.93%

Year 10 Revenue Growth3.00%

Terminal Growth Rate3.00%

Margin & Efficiency

Current EBIT Margin7.20%

Terminal EBIT Margin20.00%

Tax Rate12.86%

Historical Capex / Rev0.70%

NWC / Revenue10.00%

Key Drivers: Revenue growth, operating margin expansion, capex efficiency, and working capital management are the primary drivers of cash flow generation. Terminal value assumptions significantly impact final valuation.

Institutional-Grade Methodology

Actual Company Data: Revenue, EBIT, Capex, NWC, Tax Rate, Interest Expense, Beta

Market Assumptions: Risk-free: 4.5% (10Y), MRP: 4.5% (Damodaran 2026), Exit: 24x EV/EBITDA (Healthcare sector)

This DCF model is for informational purposes only. Projections are based on assumptions that may not materialize. Past performance does not guarantee future results. Consult a financial advisor before making investment decisions.

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