ELV Soars 17% In A Single Month, Time To Buy The Stock?

We believe there is a near-equal mix of good and bad in ELV stock given its overall Moderate operating performance and financial condition. Considering stock’s Low valuation we think it is Attractive. Here is our multi-factor assessment.

But no matter how attractive, investing in a single stock carries high risk. Trefis High Quality Portfolio and is designed to reduce stock-specific risk while giving upside exposure

Let’s get into details of each of the assessed factors but before that, for quick background: With $73 Bil in market cap, Elevance Health provides health benefits and care solutions, supporting 118 million people with medical, digital, pharmacy, behavioral, and clinical services to promote healthier lives.

[1] Valuation Looks Low

This table highlights how ELV is valued vs broader market. For more details see: ELV Valuation Ratios

[2] Growth Is Strong

• Elevance Health has seen its top line grow at an average rate of 8.3% over the last 3 years
• Its revenues have grown 10% from $172 Bil to $189 Bil in the last 12 months
• Also, its quarterly revenues grew 14.0% to $50 Bil in the most recent quarter from $44 Bil a year ago.

This table highlights how ELV is growing vs broader market.

[3] Profitability Appears Very Weak

• With cash flow margin of 3.4%, it generated nearly $6.5 Bil in operating cash flow over this period
• For the same period, ELV generated nearly $5.4 Bil in net income, suggesting net margin of about 2.8%

This table highlights how ELV profitability vs broader market.

[4] Financial Stability Looks Very Strong

• ELV Debt was $30 Bil at the end of the most recent quarter, while its current Market Cap is $73 Bil. This implies Debt-to-Equity Ratio of 41.9%
• ELV Cash (including cash equivalents) makes up $34 Bil of $122 Bil in total Assets. This yields a Cash-to-Assets Ratio of 27.8%

[4] Downturn Resilience Is Weak

ELV has fared worse than the S&P 500 index during various economic downturns. We assess this based on both (a) how much the stock fell and, (b) how quickly it recovered.

2022 Inflation Shock

• ELV stock fell 24.3% from a high of $546.77 on 31 October 2022 to $414.13 on 12 July 2023 vs. a peak-to-trough decline of 25.4% for the S&P 500.
• However, the stock fully recovered to its pre-Crisis peak by 17 May 2024
• Since then, the stock increased to a high of $562.29 on 3 September 2024 , and currently trades at $322.33

 
2020 Covid Pandemic

• ELV stock fell 43.2% from a high of $307.74 on 10 January 2020 to $174.68 on 23 March 2020 vs. a peak-to-trough decline of 33.9% for the S&P 500.
• However, the stock fully recovered to its pre-Crisis peak by 23 October 2020

 
2008 Global Financial Crisis

• ELV stock fell 67.2% from a high of $89.72 on 24 December 2007 to $29.44 on 20 November 2008 vs. a peak-to-trough decline of 56.8% for the S&P 500.
• However, the stock fully recovered to its pre-Crisis peak by 15 November 2013

But the risk is not limited to major market crashes. Stocks fall even when markets are good – think events like earnings, business updates, outlook changes. Read ELV Dip Buyer Analyses to see how the stock has recovered from sharp dips in the past.

The Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has a track record of comfortably outperforming its benchmark that includes all 3 – S&P 500, Russell, and S&P midcap. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.