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Valuing a stock isn’t as easy as some people might think. When looking for undervalued companies, various metrics can be used to indicate that it may be a smart purchase. Given the record-high level of the S&P 500 right now, finding good value S&P 500 stocks is crucial. So I turned to my robot buddy ChatGPT to see what insights it could offer me.
Understanding the reasoning
After asking the AI bot to give me the most undervalued stock in the index, it pointed me in the direction of UnitedHealth Group (NYSE:UNH). The stock’s down 47% over the past year, indicating that something significant is happening at the company. However, before I delve into the details, I wanted to see what reasoning ChatGPT would provide to support its decision.
ChatGPT feels it combines unusually attractive valuation metrics with strong fundamentals in a sector that’s broadly depressed relative to the market. It said it believes the stock to be up to 60% undervalued.
When I pressed it for details as to the fair-value models and metrics it was using, it referred me to a few different ones. For example, the trailing price-to-earnings (P/E) ratio of 13.3 and the forward P/E ratio of 16.5, which it said marks substantial discounts to both its historical norms and index-wide averages.
Now, let’s add in my own thoughts. I believe that, as a sector, healthcare is currently undervalued. Investor sentiment has shifted heavily toward technology and AI, leaving steady-growth sectors like healthcare overlooked. Yet the ageing population in both the US and UK, and increased demand for medical innovation, means that I think the sector could outperform going forward.
UnitedHealth stands out within this group because it is the dominant player in health insurance, with diversified revenue streams from insurance, healthcare services, and data analytics.
Adding in my thoughts
The answer provided by ChatGPT is the perfect reason why the AI bot can be useful, but needs to be approached with care. For a start, in some ways it tends to just summarise information that’s out there online. But I also couldn’t find any valid models that actually show a 60% discount to the actual value. The P/E ratios referenced are valid, but ultimately not that cheap (I use anything below 10 as a potential value pick).
A glaring omission was the reason why the stock is down so heavily in the first place. In mid-April, the business reported lacklustre Q1 results, missing earnings estimates. More alarmingly, the company slashed its full-year 2025 profit forecast, citing unexpectedly high medical costs. Just weeks later, CEO Andrew Witty abruptly resigned for personal reasons. His departure triggered heightened uncertainty, as the stock had still not recovered from either event.
Based on these factors, I think there’s a lot of risk associated with the stock right now. I believe it can continue to fall in the coming months, at which point it could start to become genuinely undervalued. But right now, I disagree with ChatGPT that it’s the most undervalued pick in the index and won’t be investing.
