Elevance Health (ELV)
We’re firm believers in Elevance Health. Its superb 28.1% ROIC illustrates its skill in making high-return investments.― StockStory Analyst Team
1. News
2. Summary
Why We Like Elevance Health
Formerly known as Anthem until its 2022 rebranding, Elevance Health (NYSE:ELV) is one of America's largest health insurers, serving approximately 47 million medical members through its network-based managed care plans.
- ROIC punches in at 28.1%, illustrating management’s expertise in identifying profitable investments
- Unparalleled scale of $183.3 billion in revenue enables it to spread administrative costs across a larger membership base
- Earnings per share grew by 11.5% annually over the last five years and easily exceeded the peer group average
We have an affinity for Elevance Health. The valuation looks fair when considering its quality, so this could be a good time to buy some shares.
Why Is Now The Time To Buy Elevance Health?
Elevance Health is trading at $390 per share, or 10.7x forward P/E. Valuation is lower than most companies in the healthcare space, and we believe Elevance Health is attractively-priced for its quality.
Our analysis and backtests show high-quality businesses routinely outperform the market over a multi-year period, especially when priced like this.
3. Elevance Health (ELV) Research Report: Q1 CY2025 Update
Health insurance provider Elevance Health (NYSE:EVH) reported revenue ahead of Wall Street’s expectations in Q1 CY2025, with sales up 14.5% year on year to $48.77 billion. Its non-GAAP profit of $11.97 per share was 4.3% above analysts’ consensus estimates.
Elevance Health (ELV) Q1 CY2025 Highlights:
- Revenue: $48.77 billion vs analyst estimates of $46.43 billion (14.5% year-on-year growth, 5% beat)
- Adjusted EPS: $11.97 vs analyst estimates of $11.48 (4.3% beat)
- Adjusted EBITDA: $3.62 billion vs analyst estimates of $3.8 billion (7.4% margin, 4.6% miss)
- Management reiterated its full-year Adjusted EPS guidance of $34.50 at the midpoint
- Operating Margin: 6.5%, down from 8.2% in the same quarter last year
- Free Cash Flow Margin: 1.7%, down from 4% in the same quarter last year
- Customers: 45.83 million, up from 45.73 million in the previous quarter
- Market Capitalization: $92.07 billion
Company Overview
Formerly known as Anthem until its 2022 rebranding, Elevance Health (NYSE:ELV) is one of America's largest health insurers, serving approximately 47 million medical members through its network-based managed care plans.
Elevance Health operates through a portfolio of brands including Anthem Blue Cross/Blue Shield in 14 states where it holds Blue Cross Blue Shield Association licenses, Wellpoint for its non-BCBS licensed plans, and Carelon for healthcare services. The company's business spans multiple market segments, offering health plans to individuals, employer groups, Medicare recipients, and Medicaid beneficiaries.
The company's health insurance products range from traditional PPO and HMO plans to consumer-driven health plans with health savings accounts. For Medicare-eligible individuals, Elevance offers Medicare Advantage plans, Medicare Supplement policies, and Medicare Part D prescription drug coverage. Its Medicaid business serves low-income populations across numerous states, including specialized programs for people with disabilities, foster children, and those needing long-term services.
Beyond insurance, Elevance provides an array of healthcare services through its Carelon division. These include pharmacy benefit management, behavioral health services, care management for complex conditions, and data analytics to improve healthcare outcomes. For example, a patient with multiple chronic conditions might receive coordinated care through Elevance's CareMore program (now Carelon Health), which provides personalized care plans and regular monitoring to prevent complications and reduce hospitalizations.
Elevance generates revenue primarily through insurance premiums paid by individuals, employers, and government programs. It also earns service fees from its pharmacy operations and healthcare services provided to external clients. The company leverages its scale to negotiate favorable rates with healthcare providers, helping to control costs for members while maintaining profitability.
The company employs sophisticated data analytics and digital tools to manage healthcare costs and improve outcomes. Its Sydney Health digital platform gives members access to their benefits information, telehealth services, and personalized health resources in one place. Elevance also offers care management programs for conditions like diabetes and heart disease, helping members navigate the healthcare system and adhere to treatment plans.
4. Health Insurance Providers
Upfront premiums collected by health insurers lead to reliable revenue, but profitability ultimately depends on accurate risk assessments and the ability to control medical costs. Health insurers are also highly sensitive to regulatory changes and economic conditions such as unemployment. Going forward, the industry faces tailwinds from an aging population, increasing demand for personalized healthcare services, and advancements in data analytics to improve cost management. However, continued regulatory scrutiny on pricing practices, the potential for government-led reforms such as expanded public healthcare options, and inflation in medical costs could add volatility to margins. One big debate among investors is the long-term impact of AI and whether it will help underwriting, fraud detection, and claims processing or whether it may wade into ethical grey areas like reinforcing biases and widening disparities in medical care.
Elevance Health's main competitors include other major health insurers such as UnitedHealth Group (NYSE:UNH), Cigna Group (NYSE:CI), CVS Health/Aetna (NYSE:CVS), Humana (NYSE:HUM), and Centene Corporation (NYSE:CNC).
5. Economies of Scale
Larger companies benefit from economies of scale, where fixed costs like infrastructure, technology, and administration are spread over a higher volume of goods or services, reducing the cost per unit. Scale can also lead to bargaining power with suppliers, greater brand recognition, and more investment firepower. A virtuous cycle can ensue if a scaled company plays its cards right.
With $183.2 billion in revenue over the past 12 months, Elevance Health is one of the most scaled enterprises in healthcare. This is particularly important because health insurance providers companies are volume-driven businesses due to their low margins.
6. Sales Growth
A company’s long-term sales performance is one signal of its overall quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Luckily, Elevance Health’s sales grew at a decent 10.9% compounded annual growth rate over the last five years. Its growth was slightly above the average healthcare company and shows its offerings resonate with customers.
We at StockStory place the most emphasis on long-term growth, but within healthcare, a half-decade historical view may miss recent innovations or disruptive industry trends. Elevance Health’s recent performance shows its demand has slowed as its annualized revenue growth of 6.8% over the last two years was below its five-year trend. 
Elevance Health also reports its number of customers, which reached 45.83 million in the latest quarter. Over the last two years, Elevance Health’s customer base averaged 1.8% year-on-year declines. Because this number is lower than its revenue growth, we can see the average customer spent more money each year on the company’s products and services. 
This quarter, Elevance Health reported year-on-year revenue growth of 14.5%, and its $48.77 billion of revenue exceeded Wall Street’s estimates by 5%.
Looking ahead, sell-side analysts expect revenue to grow 7.8% over the next 12 months, similar to its two-year rate. This projection is above average for the sector and suggests its newer products and services will fuel better top-line performance.
7. Operating Margin
Elevance Health was profitable over the last five years but held back by its large cost base. Its average operating margin of 6% was weak for a healthcare business.
Looking at the trend in its profitability, Elevance Health’s operating margin of 5.2% for the trailing 12 months may be around the same as five years ago, but it has decreased by 1.2 percentage points over the last two years. Still, we’re optimistic that Elevance Health can correct course and expand its profitability on a longer-term horizon due to its business quality.
In Q1, Elevance Health generated an operating profit margin of 6.5%, down 1.7 percentage points year on year. This reduction is quite minuscule and indicates the company’s overall cost structure has been relatively stable.
8. Earnings Per Share
Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.
Elevance Health’s remarkable 11.5% annual EPS growth over the last five years aligns with its revenue performance. This tells us it maintained its per-share profitability as it expanded.
In Q1, Elevance Health reported EPS at $11.97, up from $10.64 in the same quarter last year. This print beat analysts’ estimates by 4.3%. Over the next 12 months, Wall Street expects Elevance Health’s full-year EPS of $34.30 to grow 5.3%.
9. Cash Is King
Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.
Elevance Health has shown mediocre cash profitability over the last five years, giving the company limited opportunities to return capital to shareholders. Its free cash flow margin averaged 4.3%, subpar for a healthcare business.
Taking a step back, we can see that Elevance Health’s margin dropped by 5.8 percentage points during that time. If the trend continues, it could signal it’s in the middle of a big investment cycle.
Elevance Health’s free cash flow clocked in at $821 million in Q1, equivalent to a 1.7% margin. The company’s cash profitability regressed as it was 2.3 percentage points lower than in the same quarter last year, which isn’t ideal considering its longer-term trend.
10. Return on Invested Capital (ROIC)
EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).
Elevance Health’s five-year average ROIC was 27.6%, placing it among the best healthcare companies. This illustrates its management team’s ability to invest in highly profitable ventures and produce tangible results for shareholders.
We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Unfortunately, Elevance Health’s ROIC averaged 2.6 percentage point decreases over the last few years. Only time will tell if its new bets can bear fruit and potentially reverse the trend.
11. Balance Sheet Assessment
Elevance Health reported $7.5 billion of cash and $28.36 billion of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.
With $12.07 billion of EBITDA over the last 12 months, we view Elevance Health’s 1.7× net-debt-to-EBITDA ratio as safe. We also see its $576 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.
12. Key Takeaways from Elevance Health’s Q1 Results
We liked that Elevance Health beat analysts’ revenue expectations this quarter. We were also happy its full-year EPS guidance narrowly outperformed Wall Street’s estimates. On the other hand, its customer base and EBITDA both missed. Overall, we think this was a mixed quarter. The stock remained flat at $410 immediately following the results.
13. Is Now The Time To Buy Elevance Health?
Updated: June 12, 2025 at 11:50 PM EDT
Are you wondering whether to buy Elevance Health or pass? We urge investors to not only consider the latest earnings results but also longer-term business quality and valuation as well.
There are several reasons why we think Elevance Health is a great business. For starters, its revenue growth was good over the last five years. And while its customer momentum declined, its scale gives it meaningful leverage when negotiating reimbursement rates. On top of that, Elevance Health’s stellar ROIC suggests it has been a well-run company historically.
Elevance Health’s P/E ratio based on the next 12 months is 10.7x. Scanning the healthcare space today, Elevance Health’s fundamentals really stand out, and we like it at this price.
Wall Street analysts have a consensus one-year price target of $500.75 on the company (compared to the current share price of $390), implying they see 28.4% upside in buying Elevance Health in the short term.