Evaluating Elevance Health After Surge Amid ACA Subsidy Negotiation Uncertainty

If you are taking a fresh look at Elevance Health stock and wondering what to do next, you are not alone. The shares have been anything but dull lately, rising 7.4% over the past week and 5.6% in the last month. That sharp bounce is a welcome change from the stock’s tougher long-term path, with a drop of 7.0% so far this year and a significant 30.5% slip over the last twelve months. Even going back three years, the shares are down 25.7%. However, if you zoom out further to five years, they have delivered a positive return of 23.9%. These numbers can make it tricky to decide whether Elevance is a value play with a turnaround story or a stock to keep watching from the sidelines.

Recent headlines have certainly shaken up the sector, including wrangling in Washington over health insurance subsidies that could impact how millions of Americans buy coverage. There is also talk of rising rates for Affordable Care Act plans, with some insurers seeking double-digit premium hikes. These types of policy pressures shape investor expectations for major health insurance players like Elevance and may account for the market’s shifting perception of risk and reward in the stock.

So where does Elevance stand today in terms of value? On our checklist of six key valuation indicators, Elevance is undervalued in four, giving it a strong value score of 4. That places it well into buy territory on a numbers-driven basis. However, before making any decisions, it is important to break down what those valuation checks really mean and understand why traditional methods only tell part of the story. Stay tuned for a clearer and possibly even smarter way to assess Elevance’s true worth.

Why Elevance Health is lagging behind its peers

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

The Discounted Cash Flow (DCF) model estimates a company’s value by projecting its future cash flows and discounting them back to today's dollars. This approach helps investors gauge what Elevance Health is truly worth, based on real financial performance and likely future growth rather than market sentiment alone.

Currently, Elevance Health is generating just over $5.1 Billion in Free Cash Flow (FCF). Analyst projections see strong growth ahead, with FCF expected to reach around $11.3 Billion by 2029. Estimates beyond five years are extrapolated, but the overall 10-year outlook paints a picture of steady FCF expansion, with figures predicted to approach $15.2 Billion by 2035. All cash flows are reported in US dollars.

Using the 2 Stage Free Cash Flow to Equity model, the DCF analysis pegs Elevance Health’s intrinsic value at $1,344.87 per share. This valuation implies the shares are trading at a 74.7% discount to their fair value. This suggests there may be significant upside potential from current levels.

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 74.7%. Track this in your watchlist or portfolio, or discover more undervalued stocks.

Approach 2: Elevance Health Price vs Earnings (PE Ratio)

The Price-to-Earnings (PE) ratio is a widely used measure for valuing profitable companies like Elevance Health, as it relates a company’s stock price directly to its earnings power. This makes it a useful metric for assessing whether a stock is cheap or expensive relative to its profits, especially in industries where consistent earnings underpin long-term value.

Growth expectations and risk play a big role in what counts as a “normal” PE ratio. Companies with higher growth prospects or lower business risks often command premium multiples, while those facing higher risks or slower growth see lower ratios. That makes context especially important when interpreting PE ratios.

Currently, Elevance Health trades at a PE ratio of 14.29x. This is just above the average of its selected peers at 13.19x and comfortably below the broader healthcare industry average of 21.40x. On the surface, Elevance appears attractively valued compared to the industry, but a closer look provides more insight.

Simply Wall St’s "Fair Ratio" metric goes beyond simple averages by factoring in specifics like Elevance's earnings growth, profit margins, industry placement, market cap, and risk profile to estimate what its PE ratio should be in today's market. For Elevance Health, the Fair Ratio is 32.71x. This suggests that based on these holistic factors, the stock’s current multiple is well below what could be justified.

In this case, the Fair Ratio indicates that Elevance Health is undervalued at its current PE, even if it appears in line with peers or industry averages.

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 there is an even better way to understand valuation. Let’s introduce you to Narratives. A Narrative is a simple yet powerful way to make investment decisions, letting you connect your perspective on Elevance Health’s story, whether you see growth, risk, or market trends as most important, with your assumptions about future revenue, earnings, and margins. Narratives bridge the gap between a company’s real-world story and its financial forecast, helping you estimate a fair value grounded in your own view of how the business will perform.

On Simply Wall St’s Community page, Narratives are easy to create, adjust, and share. Millions of investors are already using them to compare their Fair Value estimates with today’s stock price, making better-informed buy or sell decisions. Best of all, Narratives update dynamically when new news, earnings, or industry shifts happen, making your view of Elevance Health always reflect the latest reality. For example, some investors believe Elevance could reach as high as $507 per share if Medicare Advantage expansion and digital innovation outperform, while others forecast as low as $297 due to ongoing Medicaid declines and cost pressures.

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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