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U.S. health benefits company Elevance Health, Inc. ELV appears undervalued. It is currently trading at 12.25X forward 12-month earnings, below its five-year median of 13.44X and the industry average of 15.40X. It also trades at a discount to major health insurance companies like UnitedHealth Group Incorporated UNH and Humana Inc. HUM, which have forward P/E ratios of 16.46X and 16.86X, respectively. ELV currently holds a Value Score of A.
This discounted valuation could reflect market skepticism about the company's growth prospects or potential mispricing of its intrinsic value. The key question for investors is whether this presents a buying opportunity. To determine that, it's essential to evaluate Elevance’s strengths and risks.
Image Source: Zacks Investment Research
ELV’s Tailwinds
Indianapolis-based Elevance is well-positioned for long-term expansion, supported by product diversification, premium rate hikes and a growing commercial business. The company has optimized its government segment by exiting underperforming markets, setting the stage for improved profitability.
With a strengthening commercial business, Elevance is seeing steady membership growth. In 2024, its commercial risk-based and fee-based memberships increased by 4.6% and 1% year over year, respectively. This upward trend is expected to continue in 2025.
Elevance, with a market cap of $95.7 billion, is strategically reallocating resources to higher-margin areas while pursuing prudent acquisitions. Its return on invested capital stands at 9.77%, significantly above the industry average of 5.41%, demonstrating superior efficiency in capital utilization.
The company also rewards shareholders through consistent dividends and stock buybacks. Its dividend yield of 1.59% exceeds the industry average of 1.30%. In the fourth quarter of 2024, Elevance repurchased $1.8 billion worth of shares and had $9.3 billion remaining under its buyback authorization as of Dec. 31, 2024.
ELV’s Price Performance
Shares of Elevance have gained 9.9% in the past month, outperforming its industry and the S&P 500 Index. Meanwhile, UnitedHealth and Humana witnessed declines following broader trends.
Price Performance – ELV, Industry, S&P 500, UNH & HUM
Image Source: Zacks Investment Research
ELV’s Estimates & Surprise History
The Zacks Consensus Estimate for Elevance’s 2025 and 2026 EPS implies a 3.3% and 13.9% uptick, respectively, on a year-over-year basis. The estimates remained stable over the past week. Moreover, the consensus mark for 2025 and 2026 revenues suggests a 9.2% and 7.2% increase, respectively.