On July 16, 2023, Elevance Health Inc (ELV, Financial) experienced a price change of 5.05%, bringing its stock price to $438.73. The company, boasting a market cap of $104 billion and sales of $160.7 billion, appears to be modestly undervalued with a GuruFocus Value (GF Value) of $519.35.
Elevance Health, formerly known as Anthem, is a leading health insurer in the U.S., providing medical benefits to approximately 48 million members as of December 2022. The company offers employer, individual, and government-sponsored coverage plans. Elevance Health holds a unique position as the largest single provider of Blue Cross Blue Shield branded coverage, operating in 14 states. Its reach extends beyond these states through acquisitions and government-sponsored programs such as Medicaid and Medicare Advantage plans.
Elevance Health's GF Value
The GF Value of Elevance Health (ELV, Financial) suggests the stock is modestly undervalued. The GF Value is calculated based on historical trading multiples, an adjustment factor from GuruFocus, and future business performance estimates. If the stock price is significantly above the GF Value Line, the stock may be overvalued. Conversely, if the price falls significantly below the GF Value, the stock could be undervalued and poised for higher future returns. Given its current price of $438.73 per share, Elevance Health appears to be modestly undervalued.
As Elevance Health is relatively undervalued, the long-term return of its stock is likely to exceed its business growth. These companies may deliver higher future returns at reduced risk.
Financial Strength of Elevance Health
Investing in companies with low financial strength could lead to permanent capital loss. Therefore, it's crucial to review a company’s financial strength before deciding whether to buy shares. Elevance Health’s cash-to-debt ratio is 0.4, ranking worse than 84.21% of companies in the Healthcare Plans industry. Nevertheless, GuruFocus ranks Elevance Health’s financial strength as 6 out of 10, suggesting a fair balance sheet.
Profitability and Growth
Investing in profitable companies, especially those with consistent profitability over the long term, poses less risk. Elevance Health has been profitable for 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%, ranking worse than 0% of companies in the Healthcare Plans industry. Despite this, GuruFocus ranks Elevance Health's profitability at 8 out of 10, indicating strong profitability.
The 3-year average annual revenue growth rate of Elevance Health is 17.2%, ranking better than 66.67% of companies in the Healthcare Plans industry. The 3-year average EBITDA growth rate is 12%, ranking better than 70.59% of companies in the same industry.
ROIC vs WACC
Comparing a company's return on invested capital (ROIC) to its weighted average cost of capital (WACC) can provide insights into its profitability. Elevance Health’s ROIC is 9.02, and its WACC is 7.49. When the ROIC is higher than the WACC, it implies the company is creating value for shareholders.
Conclusion
In conclusion, 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.
To find high-quality companies that may deliver above-average returns, check out the GuruFocus High Quality Low Capex Screener.
