Can Elevance Health’s Recent 7% Rally Signal a New Valuation Opportunity in 2025?

Thinking about what to do with your Elevance Health shares? Whether you’re holding, buying, or even just tracking from the sidelines, you’re definitely not alone. After all, this is a stock that has sparked plenty of debates lately, especially as its price swings have left even experienced investors rechecking their assumptions.

Over the past month, Elevance Health has managed a solid bounce, gaining 7.0% and hinting at renewed optimism from the market. But if you zoom out, there’s much more to the story. Shares are still recovering from a tough stretch, down 5.3% year-to-date and shedding 15.9% over the last twelve months. Even so, the big picture remains positive for longer-term holders, with a 35.3% gain over five years. This gain far outpaces its recent stumbles.

A lot of the recent chatter has been influenced by industry shifts, with Elevance’s ongoing push into digital healthcare and partnerships sparking conversations about strategy and risk perception. These moves have caught the market’s eye, suggesting that investors are beginning to recognize the company’s efforts to adapt to changing healthcare dynamics. That renewed attention is part of the reason for the recent uptick, even as some uncertainty remains.

In terms of valuation, Elevance Health currently scores a 4 out of 6 on our value checks, meaning it looks undervalued in two-thirds of the key areas we monitor. But what does that actually mean for investors, and how does it stack up under different models? Let’s break down each approach to the company’s valuation. Stay tuned, because by the end, I’ll introduce a smarter perspective on what this all means for your investment decision.

Why Elevance Health is lagging behind its peers

Approach 1: Elevance Health Discounted Cash Flow (DCF) Analysis

The Discounted Cash Flow (DCF) approach aims to estimate a company’s intrinsic value by projecting its future free cash flows and discounting them back to their present value. This helps investors understand what the company could be worth today, based on how much cash it is expected to generate in the future.

For Elevance Health, the most recent twelve months’ free cash flow stands at $3.58 Billion. Looking ahead, analyst estimates take us up to 2029, when cash flow is projected to reach $9.85 Billion. Beyond that, Simply Wall St extrapolates further out, mapping a consistent increase through 2035, when free cash flow is estimated at about $13.54 Billion. The DCF model used here is a two-stage Free Cash Flow to Equity model, reflecting both near-term analyst forecasts and longer-term company potential.

Taking these forward-looking cash flows and discounting them back to today results in a DCF intrinsic value of $1,209 per share. With Elevance Health currently trading at a substantial discount to this estimate, the model suggests the stock is undervalued by roughly 71.4%.

Result: UNDERVALUED

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Elevance Health.

Our Discounted Cash Flow (DCF) analysis suggests Elevance Health is undervalued by 71.4%. Track this in your watchlist or portfolio, or discover more undervalued stocks.

Approach 2: Elevance Health Price vs Earnings

The Price-to-Earnings (PE) ratio is a widely used valuation metric, especially for established, profitable companies like Elevance Health. It offers a quick snapshot of how much investors are willing to pay today for each dollar of current earnings, making it an accessible way to assess whether a stock seems reasonably priced, expensive, or cheap relative to profits.

Importantly, a “normal” or “fair” PE ratio is shaped not just by past performance but also by expectations about future growth and the perceived risks in the business. Companies with higher growth prospects or lower risk profiles usually command higher PE multiples, while lower growth or riskier companies tend to trade at a discount.

Currently, Elevance Health trades at a PE ratio of 13.9x. That is roughly in line with its immediate peers, who average 13.8x, but notably below the broader Healthcare industry’s average of 21.7x. Looking deeper, Simply Wall St's proprietary “Fair Ratio” for Elevance Health stands at 31.6x, which takes into account growth forecasts, risk factors, profit margins, industry trends, and market cap. Unlike a simple peer or industry comparison, the Fair Ratio blends these factors to tailor a more precise, company-specific benchmark.

With Elevance’s current PE significantly below its Fair Ratio, today’s valuation suggests the stock is meaningfully undervalued according to this approach.

Result: UNDERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Elevance Health Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let’s introduce you to Narratives. Narratives are a powerful new feature that allow you to weave your perspective and knowledge of a company’s story directly into its valuation by estimating future revenue, earnings, margins, and ultimately, fair value. By connecting the dots between a company’s outlook, your assumptions, and how those play into the numbers, Narratives bring investment decisions to life. This helps you see not just “what the numbers say,” but also “why they matter.”

Accessible to millions via the Simply Wall St Community page, Narratives make it simple for any investor to map out their view of Elevance Health, compare their calculated fair value to the current share price, and track whether it's time to buy, hold, or sell as new data or news emerges. Best of all, Narratives update automatically with every earnings result or major headline, so your insights and forecasts stay current in real time.

For example, some investors believe Elevance Health could be worth as much as $507 if Medicare Advantage growth surprises to the upside, while more cautious users see fair value closer to $297, reflecting concerns about cost pressures and Medicaid trends. Your Narrative lets you express whichever perspective fits your own research.

Do you think there's more to the story for Elevance Health? Create your own Narrative to let the Community know!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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