As one of the leading health insurers in the U.S., Elevance Health Inc (ELV, Financial), formerly known as Anthem, has been providing medical benefits to nearly 48 million members as of December 2022. Operating as the licensee for the Blue Cross Blue Shield Association in 14 states, Elevance Health has a unique position in the market. Its reach extends beyond these states through government-sponsored programs such as Medicaid and Medicare Advantage plans, thanks to acquisitions like Amerigroup in 2012 and MMM in 2021.
As of July 14, 2023, Elevance Health's stock price stands at $436.61, marking a 4.54% change from the previous day. With a market cap of $103.5 billion and sales reaching $160.7 billion, the company shows promising figures. However, to truly understand the stock's value, we delve into the GF Value, a unique indicator of a stock's intrinsic worth.
Understanding Elevance Health's GF Value
The GF Value of Elevance Health Inc (ELV, Financial) suggests that the stock is currently modestly undervalued. The GF Value 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, it may be overvalued, leading to poor future returns. Conversely, if the stock's share price is significantly below the GF Value Line, it may be undervalued, indicating high future returns. With its current price of $436.61 per share and a GF Value of $519.18, Elevance Health appears to be modestly undervalued.
As Elevance Health is relatively undervalued, the long-term return of its stock is likely to be higher than its business growth. For potential investments with reduced risk and higher future returns, consider these high-quality, low capex companies.
Financial Strength of Elevance Health
Investing in companies with robust financial strength minimizes the risk of permanent capital loss. A good starting point to understand a company's financial strength is reviewing its cash-to-debt ratio and interest coverage. Elevance Health's cash-to-debt ratio of 0.4 is lower than 84.21% of companies in the Healthcare Plans industry, indicating fair financial strength.
Profitability and Growth of Elevance Health
Investing in profitable companies that demonstrate consistent profitability over the long term carries less risk. Elevance Health has been profitable for 10 years over the past decade. With revenues of $160.7 billion and an EPS of $25.7 in the past 12 months, Elevance Health's profitability is strong. The company's average annual revenue growth is 17.2%, ranking better than 66.67% of companies in the Healthcare Plans industry. Its 3-year average EBITDA growth is 12%, which ranks better than 70.59% of companies in the industry.
ROIC vs WACC
Comparing a company's return on invested capital (ROIC) to its weighted average cost of capital (WACC) is another way to evaluate its profitability. If the ROIC exceeds the WACC, the company is likely creating value for its shareholders. Elevance Health's ROIC in the past 12 months is 9.02, while its WACC is 7.49, suggesting value creation.
Conclusion
In summary, 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, check out its 30-Year Financials here.
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