Elevance Health (ELV): Examining Valuation After Strategic Medicare Business Shift and 2025 Earnings Reaffirmation

Elevance Health (ELV) is making some bold moves, and if you follow the stock, you probably have questions about what comes next. The company has just announced a significant shift in its Medicare strategy by pulling out of certain underperforming Medicare Advantage markets and stepping away from the standalone Part D segment. These decisions, paired with the reaffirmation of its 2025 earnings outlook and clarity around expected results, suggest leadership is working proactively to maintain margins while managing costs and regulatory changes.

This strategic pivot comes at a time when the share price has slumped, with Elevance Health down 42% over the past year and off 15% year-to-date. While there’s clear pressure on the stock, the underlying business has been evolving through large-scale fixed income offerings and active portfolio management. Momentum has faded, but the company’s focus on higher-margin segments and cost control could eventually set the stage for renewed growth if execution goes as planned.

Is the market being too harsh, or is it fully pricing in whatever growth and risk lay ahead? For investors weighing a move, the real question is whether current valuations reflect hidden value or more pain to come.

Most Popular Narrative: 20% Undervalued

According to the most widely followed narrative, Elevance Health is considered significantly undervalued, with a calculated fair value notably higher than its current share price. This perspective is rooted in its diversified business lines and strategic focus areas, suggesting potential upside for investors who can look past current headwinds.

Elevance Health’s investment potential over the next 1-3 years lies in balancing risks associated with Medicaid declines, cost management, and regulatory uncertainties against growth opportunities in Medicare Advantage, value-based care, and digital health innovation. Its established market position and diversified portfolio provide resilience, but operational cost pressures and policy changes will be critical factors influencing performance.

What drives this sharp disconnect between market price and fair value? The narrative signals a bold call built on carefully weighted quantitative levers, with some based on future growth and others tied to present fundamentals. Which assumptions tip the scales? Curious about the formula experts used to find hidden value while competitors struggle? The full story unpacks the exact mix of numbers and metrics that could set Elevance apart from the pack.

Result: Fair Value of $390.54 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, persistent cost inflation and continued Medicaid membership declines could put further pressure on margins. This may challenge the undervaluation narrative for Elevance Health.

Find out about the key risks to this Elevance Health narrative.

Another View: Discounted Cash Flow Model

While valuation based on price-to-earnings paints Elevance Health as undervalued compared to industry averages, a second opinion from our SWS DCF model arrives at a similar conclusion, seeing hidden value where the market may not. Which method will prove more accurate as market sentiment shifts?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Elevance Health for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own Elevance Health Narrative

Consider taking the reins and exploring the numbers firsthand. If you want a different perspective or prefer your own analysis, you can develop your own view in just a few minutes with our tools. Do it your way

A good starting point is our analysis highlighting 4 key rewards investors are optimistic about regarding Elevance Health.

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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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