As of July 14, 2023, Elevance Health Inc (ELV, Financial) has seen a price change of 5.05% with a closing price of $438.73. The company's market capitalization stands at $104 billion, with a sales figure of $160.7 billion. According to GuruFocus.com's GF Value, the stock is modestly undervalued with a GF Value of $519.18. The Earnings Per Share (EPS) is $25.7, indicating the company's profitability.
Elevance Health, previously known as Anthem, is a leading health insurer in the U.S. As of December 2022, it provides medical benefits to approximately 48 million members. The company offers a variety of coverage plans, including employer, individual, and government-sponsored plans. Elevance Health stands out as the largest single provider of Blue Cross Blue Shield branded coverage, operating in 14 states. The company has expanded its reach through acquisitions like the Amerigroup deal in 2012 and MMM in 2021, offering government-sponsored programs such as Medicaid and Medicare Advantage plans.
Elevance Health's GF Value
The GF Value of Elevance Health is calculated based on historical trading multiples, an adjustment factor from GuruFocus based on past performance and growth, and estimates of future business performance. The GF Value Line represents the fair value at which the stock should ideally be traded. With its current price of $438.73 per share, Elevance Health stock appears to be modestly undervalued.
Given its relative undervaluation, the long-term return of Elevance Health's stock is likely to be higher than its business growth. This assumption is based on the principle that if the share price is significantly below the GF Value, the stock may be undervalued and have higher future returns.
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Financial Strength of Elevance Health
Companies with poor financial strength offer investors a high risk of permanent capital loss. To avoid this, it's crucial to review a company’s financial strength before deciding to purchase shares. Key indicators of financial strength include the cash-to-debt ratio and interest coverage. Elevance Health has a cash-to-debt ratio of 0.4, ranking worse than 84.21% of companies in the Healthcare Plans industry. However, the overall financial strength of Elevance Health is 6 out of 10, indicating fair financial strength.
Profitability of Elevance Health
Companies that consistently show profitability over the long term offer less risk for investors. Elevance Health has been profitable for 10 out of the past 10 years. Over the past twelve months, the company had a revenue of $160.7 billion and EPS of $25.7. Its operating margin is 0%, which ranks worse than 0% of companies in the Healthcare Plans industry. However, the overall profitability of Elevance Health is ranked 8 out of 10, indicating strong profitability.
Growth of Elevance Health
Growth is a crucial factor in the valuation of a company. Elevance Health’s 3-year average revenue growth rate is better than 66.67% of companies in the Healthcare Plans industry. Elevance Health’s 3-year average EBITDA growth rate is 12%, which ranks better than 70.59% of companies in the Healthcare Plans industry.
ROIC vs WACC of Elevance Health
Another way to evaluate a company's profitability is by comparing its return on invested capital (ROIC) and the weighted cost of capital (WACC). ROIC measures how well a company generates cash flow relative to the capital it has invested in its business. WACC is the rate that a company is expected to pay on average to all its security holders to finance its assets. For the past 12 months, Elevance Health’s ROIC is 9.02, and its WACC is 7.49.
Conclusion
In conclusion, the stock of Elevance Health (ELV, Financial) appears to be modestly undervalued. The company's financial condition is fair, and its profitability is strong. Its growth ranks better than 70.59% of companies in the Healthcare Plans industry. To learn more about Elevance Health stock, you can check out its 30-Year Financials here.
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