On August 19, 2026, we delve into the DCF analysis for Elevance Health Inc ELV, a company that has shown strong price performance recently, with a year-to-date increase of 14.8% and a remarkable 31.5% rise over the past year. Here are some key points to consider:
- DCF Earnings-based intrinsic value of $614.23 compared to the current price of $398.27, indicating a margin of safety of 35.2%.
- DCF Free Cash Flow (FCF)-based intrinsic value stands at $390.62, suggesting a fair valuation with a -2.0% margin of safety.
- GF Scoreâ„¢ of 90/100 indicates strong financial health and growth potential, but the low predictability rank of 2/5 stars raises concerns about the reliability of the DCF inputs.
What Is ELV Worth? DCF Earnings-Based Model
The DCF earnings-based model for Elevance Health Inc utilizes a two-stage approach to estimate intrinsic value. The first stage anticipates a robust earnings growth of 14.0% per year for the next ten years, followed by a terminal growth phase of 4% for the subsequent ten years. This model reflects the company's potential for sustained growth, albeit with some inherent risks due to its low predictability rank.
| Parameter | Value |
|---|---|
| Current EPS (TTM, excl. non-recurring) | $29.39 |
| 10-Year Growth Rate | 14.0% |
| 10-Year Treasury Rate | 4.70% |
| Discount Rate (ceil(Treasury) + 6%) | 11% |
| Terminal Growth Rate | 4% |
In the growth phase, the earnings per share (EPS) is projected to grow at 14.0% annually for ten years, discounted at a rate of 11%. The terminal phase assumes a 4% growth rate for the next ten years, also discounted at 11%. Below is a summary of the calculations:
| Stage | Description | Value |
|---|---|---|
| Growth Stage (Years 1-10) | EPS growing at 14.0%, discounted at 11% | $341.33 |
| Terminal Stage (Years 11-20) | 4% terminal growth, discounted at 11% | $272.90 |
| Intrinsic Value | Growth + Terminal | $614.23 |
With the current price at $398.27, the intrinsic value of $614.23 suggests that Elevance Health is significantly undervalued, offering a margin of safety of 35.2%. It is important to note that GuruFocus employs EPS figures excluding non-recurring items, as research indicates that stock prices tend to correlate more closely with earnings than with free cash flow. For a detailed calculation, visit the ELV DCF Calculator.
What Does the Free Cash Flow DCF Say?
The Free Cash Flow (FCF)-based intrinsic value for Elevance Health is calculated at $390.62. This valuation presents a contrasting view compared to the earnings-based DCF model, indicating a fair valuation with a -2.0% margin of safety. The divergence between the two models highlights the uncertainty surrounding the company's future cash flows and earnings quality.
How Does GF Valueâ„¢ Compare to the DCF Models?
According to GuruFocus, the GF Valueâ„¢ for Elevance Health is $483.97, suggesting that the stock is undervalued by 17.7%. This proprietary measure integrates historical trading multiples, past business growth, and future performance estimates, providing a third perspective on valuation. The earnings-based DCF and GF Valueâ„¢ indicate a significant undervaluation, while the FCF model suggests a more cautious stance, reflecting the disagreement among the three models. For more insights, check the GF Valueâ„¢.
What Does ELV's GF Scoreâ„¢ Tell Us?
The GF Scoreâ„¢ evaluates a company's financial health and growth potential based on various metrics. Elevance Health's GF Scoreâ„¢ is 90/100, indicating strong performance across several categories, although its predictability rank of 2/5 stars suggests that the DCF model's reliability is compromised. Below is a summary of the GF Scoreâ„¢ metrics:
| Metric | Rating |
|---|---|
| GF Scoreâ„¢ | 90/100 |
| Financial Strength | 5/10 |
| Profitability | 8/10 |
| Growth | 9/10 |
| Valuation | 8/10 |
| Momentum | 10/10 |
With a predictability rank of 2/5 stars, it is clear that the DCF model may not be the most reliable for Elevance Health. For further details, visit the ELV stock page.
Key Assumptions and Limitations
It is crucial to recognize that DCF models are highly sensitive to the assumptions made regarding growth rates and discount rates. Stocks with lower predictability ratings, such as Elevance Health, tend to produce less reliable DCF estimates. The terminal growth rate of 4% is a simplifying assumption that may not fully capture the complexities of future growth.
What This Means for Investors
In synthesizing the three valuation models—DCF earnings, DCF FCF, and GF Value™—we observe a notable tension. The earnings-based DCF suggests significant undervaluation, while the FCF model indicates a fair value. The GF Value™ aligns more closely with the earnings-based DCF, providing a more optimistic outlook. Additionally, the guru ownership signal is noteworthy, with 26 gurus currently holding the stock, 12 adding to their positions, and 13 trimming their holdings. Insiders have also engaged in net buying over the past year, which may reflect confidence in the company's future. This multifaceted analysis underscores the importance of considering both quantitative and qualitative factors when evaluating Elevance Health. For more insights, explore the ELV DCF Calculator.
Frequently Asked Questions
What is ELV's intrinsic value based on DCF?
According to the analysis, the earnings-based intrinsic value is $614.23, while the FCF-based intrinsic value is $390.62.
Is ELV overvalued or undervalued?
Based on the DCF earnings model, ELV appears to be significantly undervalued, while the FCF model suggests it is fairly valued. The GF Valueâ„¢ also indicates undervaluation.
How reliable is the DCF model for ELV?
The reliability of the DCF model for Elevance Health is limited due to its predictability rank of 2/5 stars, indicating potential uncertainties in the projections.
This stock alert was generated using automated technology and GuruFocus financial data to provide readers with timely and accurate market reporting. This content was reviewed by GuruFocus editorial team prior to publication. Please send any questions or comments about this story to [email protected].
