On July 15, 2023, Elevance Health Inc (ELV, Financial) saw a 5.05% increase in its stock price, reaching $438.73 per share. With a market capitalization of $104 billion, the company's GF Value, a unique measure of intrinsic worth, stands at $519.26, suggesting that the stock is modestly undervalued. Elevance Health (ELV) has a significant presence in the US health insurance sector, providing medical benefits to 48 million members as of December 2022. The company offers employer, individual, and government-sponsored coverage plans, making it a key player in the industry.
GF Value of Elevance Health
The GF Value of Elevance Health (ELV, Financial) is calculated based on historical trading multiples, an adjustment factor from GuruFocus based on past performance and growth, and estimates of future business performance. If the stock's share price is significantly above the GF Value Line, the stock may be overvalued and have poor future returns. Conversely, if the stock's share price is significantly below the GF Value Line, the stock may be undervalued and have high future returns. With Elevance Health's current price of $438.73 per share and a market cap of $104 billion, the stock is considered modestly undervalued.
Given that Elevance Health is relatively undervalued, the long-term return of its stock is likely to be higher than its business growth. These companies may deliver higher future returns at reduced risk.
Financial Strength of Elevance Health
Before investing in a company, it's crucial to assess its financial strength. Companies with weak financial health pose a higher risk of permanent loss. A useful tool for understanding a company's financial strength is the cash-to-debt ratio. Elevance Health has a cash-to-debt ratio of 0.4, which is lower than 84.21% of companies in the Healthcare Plans industry, indicating fair financial strength.
Profitability of Elevance Health
Consistent profitability over the long term reduces investment risk. Elevance Health has been profitable for 10 out of the past 10 years, with a revenue of $160.7 billion and EPS of $25.7 over the past twelve months. However, its operating margin is 0%, ranking lower than other companies in the Healthcare Plans industry. Nevertheless, Elevance Health's overall profitability is strong, ranking 8 out of 10.
Growth of Elevance Health
Growth is a significant factor in a company's valuation. Elevance Health's 3-year average annual revenue growth is 17.2%, which is better than 66.67% of companies in the Healthcare Plans industry. Its 3-year average EBITDA growth rate is 12%, better than 70.59% of companies in the industry.
ROIC vs WACC
Comparing a company's return on invested capital (ROIC) and the weighted cost of capital (WACC) provides another perspective on profitability. Elevance Health's ROIC is 9.02, and its WACC is 7.49, suggesting the company effectively generates cash flow relative to its invested capital.
Conclusion
Overall, Elevance Health Inc (ELV, Financial) stock 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, check out its 30-Year Financials here.
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