With Strong Cash Flow, Elevance Health Stock Poised to Rise?
Elevance Health (ELV) could be a good pick for your portfolio, with its high cash yield, good fundamentals, and discounted valuation. Companies like this can use cash to fuel additional revenue growth, or simply pay their shareholders through dividends or buybacks. Either move makes them attractive to the market
What Is Happening With ELV
ELV stock is currently trading at P/S (Price-to-Sales) ratio that is at a meaningful discount to its 3-month and 2-year highs, and also below its 3-year average.
The stock may not reflect it yet, but here is what’s going well. Elevance Health saw strong 2025 membership, and its Carelon services segment expanded through late 2025, driven by acquisitions and integrated solutions. Though a low single-digit revenue decline is projected for 2026 and Medicaid membership faces attrition, strategic repositioning and pricing discipline in Medicare Advantage and ACA plans aim to improve future margins. The company reaffirmed its 2026 outlook, which already accounts for the March 2026 CMS sanctions.
ELV Has Good Fundamentals
- Good Cash Yield: Not many stocks offer free cash flow yield of 5.1%, but Elevance Health stock does
- Growth: Last 12 revenue growth of 12.6% – low growth, but this selection is all about high yield and margin
- Valuation: ELV stock currently trading at 48% below 2Y high, 18% below 1M high, and at a PS lower than 3Y average.
Below is a quick comparison of ELV fundamentals with S&P medians.
| ELV | S&P Median | |
|---|---|---|
| Sector | Health Care | – |
| Industry | Managed Health Care | – |
| Free Cash Flow Yield | 5.1% | 4.2% |
| Revenue Growth LTM | 12.6% | 6.6% |
| Revenue Growth 3YAVG | 8.4% | 5.5% |
| Operating Margin LTM | 4% | 18.7% |
| Operating Margin 3YAVG | 4.7% | 18.2% |
| PE Ratio | 11.0 | 24.3 |
*LTM: Last Twelve Months
But What Is The Risk Involved?
While ELV stock may be a compelling investment opportunity, it’s always helpful to be aware of a stock’s history of drawdown. ELV fell roughly 67% in the Global Financial Crisis, took a 43% hit during the Covid pandemic, and dropped about 25% in both the 2018 correction and the recent inflation shock. Even the less severe downturns still carved out losses north of 20%. Solid fundamentals matter, but when the market turns, ELV’s history shows it’s not immune to sharp pullbacks. 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.
For more details and our view, see Buy or Sell ELV Stock.
Stocks Like ELV
Not ready to act on ELV? Consider these alternatives:
We chose these stocks using the following criteria:
- Greater than $2 Bil in market cap
- Dipped last month & meaningfully below 2Y high
- Current P/S < last few year average
- Strong operating margin with no instances of large margin collapse
- High free cash flow yield
A portfolio of stocks with the criteria above would have performed as follows since 12/31/2016:
- Average 6-month and 12-month forward returns of 10.4% and 20.4%, respectively
- Win rate (percentage of picks returning positive) of about 74% for 12-month period
- Strategy consistent across market cycles
Portfolios Win When Stock Picks Fall Short
Stocks soar and sink – the key is staying invested. A balanced portfolio helps you ride market volatility, boosts gains, and reduces single stock risk.
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 – the S&P 500, S&P mid-cap, and Russell 2000 indices. Why is that? HQ Portfolio has posted more than 105% in cumulative return since inception, with less risk versus the benchmark index, as evident in HQ Portfolio performance metrics.