Is It Too Late To Consider Buying Anthem, Inc. (NYSE:ANTM)?

By
Simply Wall St
Published
May 09, 2022
NYSE:ANTM
Source: Shutterstock

Anthem, Inc. (NYSE:ANTM) saw a decent share price growth in the teens level on the NYSE over the last few months. As a large-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. But what if there is still an opportunity to buy? Today I will analyse the most recent data on Anthem’s outlook and valuation to see if the opportunity still exists.

View our latest analysis for Anthem

What's the opportunity in Anthem?

According to my price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average, the stock price seems to be justfied. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Anthem’s ratio of 19.48x is trading slightly above its industry peers’ ratio of 19.39x, which means if you buy Anthem today, you’d be paying a relatively reasonable price for it. And if you believe that Anthem should be trading at this level in the long run, then there should only be a fairly immaterial downside vs other industry peers. Furthermore, Anthem’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. This may mean it is less likely for the stock to fall lower from natural market volatility, which suggests less opportunities to buy moving forward.

Can we expect growth from Anthem?

earnings-and-revenue-growth
NYSE:ANTM Earnings and Revenue Growth May 9th 2022

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. With profit expected to grow by 34% over the next couple of years, the future seems bright for Anthem. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.

What this means for you:

Are you a shareholder? It seems like the market has already priced in ANTM’s positive outlook, with shares trading around industry price multiples. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at ANTM? Will you have enough conviction to buy should the price fluctuate below the industry PE ratio?

Are you a potential investor? If you’ve been keeping tabs on ANTM, now may not be the most advantageous time to buy, given it is trading around industry price multiples. However, the optimistic forecast is encouraging for ANTM, which means it’s worth diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. While conducting our analysis, we found that Anthem has 1 warning sign and it would be unwise to ignore it.

If you are no longer interested in Anthem, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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