Does Elevance Health's (ELV) Rising Medical Costs Point to a Shift in Efficiency Strategy?

• Earlier this month, Elevance Health reported quarterly earnings that missed analyst estimates and cut its 2025 guidance amid elevated medical costs and operating pressures.
• An interesting insight is that while Elevance has invested heavily in growth and technology, its return on capital employed dropped to 11%, reflecting a short-term decline in efficiency despite higher capital spending and revenue expansion.
• We'll explore how this guidance reduction and persistent medical cost trend may affect Elevance Health's investment case going forward.

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Elevance Health Investment Narrative Recap

To be a shareholder in Elevance Health today, you need confidence that the company’s investments in technology and healthcare services will translate into long-term earnings stability, despite headwinds. The latest earnings miss and guidance cut do raise questions about whether medical cost pressures are a temporary challenge or a structural issue, making it harder to view margin recovery as an immediate catalyst. The biggest near-term risk remains persistently elevated medical costs and lagging state Medicaid rate adjustments; these threaten both profitability and confidence in near-term earnings momentum.

Among recent announcements, Elevance’s Q2 results, showing rising revenue but notably lower net income and EPS compared to a year earlier, best highlight the tension between topline growth and cost control effectiveness. This ties directly into the current catalyst: whether ongoing investment in analytics and care delivery can bend the medical cost trend and help restore margin expansion.

In contrast, investors should be aware that if cost pressures outlast the current pricing and rate cycle, the outlook for sustained profit recovery could be challenged by...

Read the full narrative on Elevance Health (it's free!)

Elevance Health is projected to reach $230.4 billion in revenue and $7.4 billion in earnings by 2028. This outlook relies on a 6.8% annual revenue growth rate and a $2.0 billion increase in earnings from the current $5.4 billion.

Uncover how Elevance Health's forecasts yield a $370.44 fair value, a 18% upside to its current price.

Exploring Other Perspectives

Twelve members of the Simply Wall St Community set fair value estimates for Elevance Health between US$304 and US$1,344, showing broad disagreement on future upside. Many cite ongoing medical cost inflation and rate recovery delays as central risks to the company’s earnings profile, underscoring why different market participants may weigh growth potential and operational challenges so differently.

Explore 12 other fair value estimates on Elevance Health - why the stock might be worth over 4x more than the current price!

Build Your Own Elevance Health Narrative

Disagree with existing narratives? Create your own in under 3 minutes - extraordinary investment returns rarely come from following the herd.

• A great starting point for your Elevance Health research is our analysis highlighting 3 key rewards that could impact your investment decision.
• Our free Elevance Health research report provides a comprehensive fundamental analysis summarized in a single visual - the Snowflake - making it easy to evaluate Elevance Health's overall financial health at a glance.

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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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