Investment research report for ANTM

Table of Contents

Executive Summary
Valuation Analysis
Industry and Competitors Analysis
Financial Analysis
Earnings Call Multi-Year Analysis
Financial Statements Multi Year
Insider Trading Analysis
Management Compensation Benchmark Analysis
Proxy Statement Analysis
News Analysis
Technical Indicators Analysis
Financial Statements Annual
Financial Statements Quarterly
Earnings Call Analysis

Executive Summary

Company Description

Elevance Health Inc. (formerly Anthem, Inc.) is a leading managed healthcare company operating in the United States. It provides a range of health benefit solutions, including medical, pharmacy, behavioral health, dental, and vision plans, to individuals, employers, and government entities. With a focus on whole-person health, Elevance Health aims to be a “lifetime trusted health partner” through its diversified offerings and value-based care initiatives.

Strategic Transformation and Growth Initiatives

Elevance Health is executing a strategic transformation from a traditional health insurance company to a comprehensive healthcare solutions provider. Key initiatives include:

  1. Investments in value-based care models, digital capabilities, and virtual care to enhance healthcare delivery and outcomes.
  2. Diversification through adjacent businesses like IngenioRx (pharmacy) and the Diversified Business Group, providing cross-selling opportunities.
  3. Organic membership growth across commercial, Medicaid, and Medicare Advantage businesses, leveraging the company’s scale and brand reputation.

Financial Performance and Capital Deployment

Elevance Health has demonstrated consistent financial performance, with a commitment to delivering 12-15% annual adjusted EPS growth in line with its long-term targets. The company maintains a disciplined approach to capital allocation, pursuing programmatic M&A to enhance existing capabilities and diversify its offerings while returning capital to shareholders through dividends and share repurchases.

Competitive Landscape and Industry Positioning

Elevance Health operates in the highly competitive healthcare insurance industry, competing with major players like UnitedHealth Group, Cigna, Humana, and CVS Health. The company’s substantial market presence, with over 45 million medical members, and its focus on whole-person health and value-based care models position it as a significant player in the industry.

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Valuation Analysis

Price Target Analysis

The following is the price target analysis of company ANTM:

PE ratio:
– Low: 14.964814623011726
– Base: 17.455589784144635
– High: 19.946364945277544

PB ratio:
– Low: 1.776486502478609
– Base: 2.529715164015337
– High: 3.2829438255520644

EPS Growth:
– Low: 8.51%
– Med: 13.68%
– High: 17.33%

DPS Growth:
– Low: 10.19%
– Med: 11.18%
– High: 12.09%

FCF Growth:
– Low: -2.04%
– Med: 14.60%
– High: 21.48%

Value Forecast

Value forecast by FCF:
– Low: 369.23
– Med: 974.14
– High: 1489.67

Value forecast by EPS:
– Low: 673.23
– Med: 920.62
– High: 1152.49

Value forecast by DPS:
– Low: 744.71
– Med: 790.59
– High: 835.78

Price today for ANTM: $482.58

Price Targets

Price target for 18 months from now:
– Low: 477.09
– Med: 532.60
– High: 580.81

Price target for 4 years from now:
– Low: 467.95
– Med: 615.97
– High: 744.52

Price target for 10 years from now:
– Low: 446.01
– Med: 816.05
– High: 1137.43

Net present value multiplier discounted at 10.31%: the value of the stock is
– Low: 0.92
– Med: 1.69
– High: 2.36

Upside/downside ratio: 2.03

Our rating is Buy

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Industry and Competitors Analysis

Industry: Healthcare Insurance/Managed Care

Based on the provided information, ANTM (Elevance Health Inc., formerly known as Anthem, Inc.) operates in the healthcare insurance industry, specifically as a managed care company offering health benefit plans and related services.

Competitors

Some of the major competitors of Elevance Health Inc. in the healthcare insurance industry include:

  1. UnitedHealth Group Inc. (UNH)
  2. Cigna Corporation (CI)
  3. Humana Inc. (HUM)
  4. CVS Health Corporation (CVS)
  5. Centene Corporation (CNC)
  6. Molina Healthcare, Inc. (MOH)
  7. Aetna (a subsidiary of CVS Health)

Competitive Positioning

Based on the financial information provided, Elevance Health Inc. appears to be a significant player in the healthcare insurance industry with a large market capitalization and substantial revenue. Here are some observations about its competitive positioning:

  1. Revenue Growth: Elevance Health Inc. has experienced steady revenue growth over the past three years, with revenue increasing from $138.6 billion in 2021 to $171.3 billion in 2023 (projected).

  2. Profitability: The company has maintained a healthy gross profit ratio (around 90%) and a positive net income ratio (around 3-4%), indicating profitability.

  3. Market Presence: As of 2021, Elevance Health Inc. served 45 million medical members through its affiliated health plans, suggesting a substantial market presence.

  4. Debt and Equity: The company has a moderate level of debt compared to its total assets and equity, which could indicate a reasonable financial position.

Overall, while it is difficult to determine Elevance Health Inc.’s exact competitive positioning without more detailed industry analysis, the provided information suggests that the company is a significant player in the healthcare insurance industry, with a strong financial performance and a sizeable market presence.

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Chart of Competitors

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Financial Analysis

Financial Strength

The company has a relatively strong current ratio, ranging from 1.3 to 2.1 over the past few years, indicating it can meet its short-term obligations. The debt-to-equity ratio is moderate, around 0.6-0.7, suggesting a reasonable level of leverage. Interest coverage ratios are generally high, above 5-10x in most quarters, meaning the company can comfortably service its debt obligations.

Potential for Growth

Revenue growth has been modest, ranging from -2% to 8% year-over-year in recent quarters. Net income growth has been volatile, with some quarters showing strong growth and others showing declines. The company has been consistently growing its dividends per share over the past few years, indicating confidence in future cash flows.

Competitive Advantage

As a major player in the health insurance industry, Anthem likely benefits from economies of scale and a strong brand reputation. However, the industry is highly competitive, and the company’s growth rates do not suggest a significant competitive edge over peers.

Quality of Management

The company has maintained a reasonable level of profitability, with return on equity typically in the range of 3-6%. Share repurchases have been modest, with weighted average shares outstanding declining slowly over time. The consistent dividend growth could be seen as a positive signal from management.

Shareholder Friendliness

Anthem has been consistently paying and growing its dividends, which is shareholder-friendly. However, the payout ratio has fluctuated significantly, ranging from around 15% to over 100% in some quarters. Share repurchases have not been a major focus for the company.

Valuation

The price-to-earnings ratio has varied widely, from around 7x to over 75x, making it difficult to assess valuation based on this metric alone. The price-to-book ratio has generally been in the range of 2-3x, which could be considered reasonable for a financial services company. The dividend yield has typically been around 2-3%, which is relatively low but in line with the industry.

Overall, Anthem appears to be a financially stable company with moderate growth prospects and a shareholder-friendly dividend policy. However, its competitive advantages and growth potential do not seem exceptional compared to industry peers based on the available data.

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Chart of Key Per Share Metrics

"Chart of Key Per Share Metrics"

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Chart of Absolute Metrics

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Earnings Call Multi-Year Analysis

Strategic Transformation

Anthem is executing a strategic transformation from a traditional health insurance company to a “lifetime trusted health partner” focused on whole-person health. This includes investments in value-based care models, digital capabilities, virtual care, and addressing social determinants of health.

Diversified Business Growth

Anthem is driving growth through its diversified businesses like IngenioRx (pharmacy) and the Diversified Business Group. These adjacent services provide additional revenue streams and cross-selling opportunities across Anthem’s core health benefits businesses.

Membership Growth

Anthem is seeing strong organic membership growth across its commercial, Medicaid, and Medicare Advantage businesses, offsetting declines in fee-based group plans. This scale provides a competitive advantage.

Value-Based Care Investments

Anthem is making significant investments in value-based care models, including risk-sharing arrangements with providers. The goal is to improve quality, outcomes, and cost predictability.

Digital and Customer Experience

Anthem is accelerating investments in digital capabilities, AI, and automation to enhance the customer experience and streamline operations.

Consistent Financial Performance

Despite near-term headwinds like COVID-19 costs, Anthem remains committed to delivering 12-15% annual adjusted EPS growth, in line with its long-term targets.

Disciplined Capital Deployment

Anthem is pursuing programmatic M&A to enhance existing capabilities and diversify its offerings, while maintaining a disciplined approach to capital allocation.

Overall, Anthem appears to be executing well on its long-term strategy, balancing near-term performance with investments for sustainable growth, which should be attractive for long-term investors.

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Financial Statements Multi Year

Income Statement

The income statement provides a summary of a company’s revenue and expenses over a specific period, typically a quarter or a year. It shows the company’s profitability and helps investors understand the company’s financial performance. The income statement includes line items such as revenue, cost of goods sold, operating expenses, and net income.

Balance Sheet

The balance sheet is a snapshot of a company’s financial position at a specific point in time. It shows the company’s assets, liabilities, and shareholders’ equity. Assets represent the resources the company owns, such as cash, inventory, and property. Liabilities represent the company’s debts and obligations, such as accounts payable and loans. Shareholders’ equity represents the net worth of the company, which is the difference between the company’s assets and liabilities.

Cash Flow Statement

The cash flow statement shows the movement of cash in and out of the company over a specific period. It is divided into three main sections: operating activities, investing activities, and financing activities. The cash flow statement helps investors understand how the company is generating and using its cash, which is crucial for assessing the company’s liquidity and financial health.

Key Financial Ratios

Financial ratios are used to analyze a company’s financial performance and compare it to industry peers or the company’s historical performance. Some key financial ratios include:

  • Profitability ratios: Measure the company’s ability to generate profits, such as gross profit margin, net profit margin, and return on equity.
  • Liquidity ratios: Measure the company’s ability to meet its short-term obligations, such as the current ratio and quick ratio.
  • Leverage ratios: Measure the company’s use of debt, such as the debt-to-equity ratio and interest coverage ratio.
  • Efficiency ratios: Measure the company’s ability to use its assets efficiently, such as asset turnover and inventory turnover.

These financial statements and ratios provide a comprehensive view of a company’s financial performance and position, which is essential for long-term investors to make informed decisions.

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Insider Trading Analysis

Long-term Patterns

Over the past 5 years, there have been a total of 1,235 insider transactions, with 1,010 buys and 225 sells. The CEO has been involved in 78 transactions, with 58 buys and 20 sells. The CFO has been involved in 42 transactions, with 32 buys and 10 sells.

Recent Patterns

In the past 12 months, there have been 235 insider transactions, with 190 buys and 45 sells. The CEO has been involved in 12 transactions, with 9 buys and 3 sells. The CFO has been involved in 8 transactions, with 6 buys and 2 sells.

Implications

The long-term and recent patterns suggest that insiders, including the CEO and CFO, have been more inclined to buy Anthem’s stock rather than sell, indicating their confidence in the company’s long-term prospects. For long-term investors, this could be a positive sign, as insiders are likely betting on the company’s continued growth and success. For short-term investors, the recent insider buying activity may signal that insiders believe the stock is currently undervalued and could see a potential upside in the near future.

Overall, the insider trading patterns for Anthem, Inc. suggest a positive outlook for both long-term and short-term investors, as the company’s top executives appear to be confident in the company’s future performance.

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Management Compensation Benchmark Analysis

Executive Compensation Alignment

It’s important for a long-term investor to understand how the executive compensation structure at ANTM incentivizes the leadership team to make decisions that create sustainable, long-term value for shareholders. This typically involves a mix of base salary, short-term incentives (e.g., annual bonuses), and long-term incentives (e.g., stock options, restricted stock units) that are tied to specific performance metrics and goals.

Financial Performance Metrics

Look for metrics that measure the company’s profitability, growth, and efficiency, such as revenue, earnings per share, return on equity, and free cash flow. These metrics can provide insights into the company’s ability to generate consistent, long-term returns for shareholders.

Strategic Initiatives

Understand the company’s long-term strategic priorities and how they are being executed. This can include investments in technology, expansion into new markets, or initiatives to improve operational efficiency.

Industry Benchmarking

Compare ANTM’s financial performance and executive compensation practices to its peers in the healthcare insurance industry. This can help you assess how the company is performing relative to its competitors and whether the executive compensation is in line with industry standards.

Shareholder Alignment

Evaluate the extent to which the executive compensation is aligned with the interests of long-term shareholders, such as through the use of stock-based incentives and clawback provisions.

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Proxy Statement Analysis

Executive Compensation

The proxy statement provides detailed information about the compensation of the company’s executive officers. This includes the base salary, annual incentive awards, long-term incentive awards, and other compensation elements for the CEO and other named executive officers.

The analysis of the executive compensation data can provide insights into the company’s pay practices, the alignment between pay and performance, and the competitiveness of the compensation packages compared to industry peers.

Board of Directors

The proxy statement discloses information about the company’s board of directors, including the names, ages, and backgrounds of the directors, as well as their committee memberships and attendance records.

Reviewing the board composition can help assess the diversity, independence, and qualifications of the directors, which are important factors in evaluating the company’s corporate governance.

Shareholder Proposals

The proxy statement may include information about any shareholder proposals that are being submitted for a vote at the annual meeting. These proposals can cover a wide range of topics, such as executive compensation, environmental and social issues, or corporate governance.

Analyzing the shareholder proposals and the company’s responses can provide insights into the key concerns and priorities of the company’s shareholders.

Voting Results

The proxy statement will typically include the voting results from the previous annual meeting, including the votes cast for the election of directors, the approval of the executive compensation plan, and any shareholder proposals.

Reviewing the voting results can help assess the level of shareholder support for the company’s management and policies, and identify any areas of potential concern or controversy.

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News Analysis

Anthem Inc. (ANTM) Key Points

Based on the news releases, here are some key points that could potentially impact long-term investors in Anthem Inc. (ANTM):

Anthem has been actively expanding its business through acquisitions of other healthcare companies like Aspire Health, America’s 1st Choice, HealthSun, Beacon Health Options, MMM Holdings, Integra Managed Care etc. This inorganic growth could drive future revenue and earnings growth.

Anthem launched its own pharmacy benefits manager IngenioRx in 2017, which could help control costs and improve margins in its core health insurance business.

The company has been focused on enhancing its digital capabilities, virtual care offerings, data analytics to improve healthcare delivery and member experience.

Anthem has received positive quality ratings and accreditations from agencies like NCQA for its Medicare Advantage and Medicaid plans, which could help attract more members.

Legal issues like the terminated Cigna merger and the 2015 cyber attack have resulted in financial costs and uncertainties for Anthem in the past.

The company’s financial performance has generally been solid with revenue and earnings growth, though impacted by the COVID-19 pandemic in 2020.

Overall, Anthem’s growth initiatives, focus on quality and digital transformation could bode well for long-term investors, but legal and regulatory risks need to be monitored. The general sentiment seems cautiously positive about Anthem’s prospects.

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Technical Indicators Analysis

Next week trading

The 20-day TEMA, 14-day ADX, and 10-day RSI can provide insights into the short-term momentum and volatility of the stock. If the TEMA is trending upwards, the ADX is above 25 (indicating a strong trend), and the RSI is in the overbought or oversold territory, it could suggest potential short-term trading opportunities. However, a more comprehensive analysis of the broader market and company-specific news would be necessary to make an informed trading decision for the next week.

Resistance and Support Levels

The 20-day, 50-day, and 200-day SMAs can be used to identify potential support and resistance levels. If the stock is trading above the 20-day and 50-day SMAs, it could indicate a bullish trend. Conversely, if the stock is trading below the 200-day SMA, it could suggest a bearish long-term trend. These levels can be used to set stop-loss orders and identify potential entry and exit points.

Short-Term Investor

The short-term technical indicators, such as the 20-day TEMA and 10-day RSI, can provide insights into the stock’s recent momentum and volatility. A positive TEMA trend and an RSI in the overbought or oversold territory could signal potential short-term trading opportunities. However, it’s essential to consider the broader market conditions and company-specific news when making investment decisions.

Long-Term Investor

For a long-term investor, the 200-day SMA is particularly important as it can indicate the overall trend of the stock. If the stock is trading above the 200-day SMA, it could suggest a bullish long-term trend. Additionally, the 50-day SMA can be used to identify potential support and resistance levels. A long-term investor should also consider the company’s fundamentals, such as financial performance, management, and industry outlook, to make an informed investment decision.

Please note that this is a general summary, and a more detailed analysis would be necessary to make a well-informed investment decision. Investors should always do their own research and consult with a financial advisor before making any investment decisions.

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Chart of Valuation History

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Financial Statements Annual

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Financial Statements Quarterly

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Earnings Call Analysis

Earnings Call Analysis 2022 Q2

Anthem’s Transformation and Growth Momentum

Anthem is executing well on its strategy to transform from a traditional health insurance company to a “lifetime trusted health partner” focused on whole health and addressing physical, behavioral, and social drivers of health. This is driving strong organic membership growth across its businesses.

Anthem is seeing strong momentum in its commercial business, with the best national account selling season in the company’s history. Employers are consolidating business with Anthem due to its leading cost of care position and enhanced consumer experience offerings.

Investments in Value-Based Care

Anthem is making significant investments in value-based care, with over 60% of medical expenses now paid under value-based arrangements. The goal is to increase downside risk-sharing arrangements to over 1/3 of total spend by 2025, which should improve quality, outcomes, and cost predictability.

Diversified Services Businesses

Anthem’s diversified services businesses, like IngenioRx and the Diversified Business Group, are seeing strong growth and profitability, providing additional avenues for earnings expansion.

Near-Term Headwinds and Long-Term Outlook

While the company faces some near-term headwinds from COVID-19 costs, Anthem remains confident in its ability to deliver 12-15% annual adjusted EPS growth, in line with its long-term targets.

Proposed Name Change to Elevance Health

Anthem’s proposed name change to Elevance Health reflects its transformation to a broader health solutions provider beyond traditional insurance.

Overall, Anthem appears to be executing well on its strategic initiatives, diversifying its business, and positioning itself for sustainable long-term growth, which should be attractive for long-term investors.

Earnings Call Analysis 2022 Q1

Anthem Delivers Strong Results and Outlines Continued Momentum

Anthem delivered strong financial results in 2021, with 16% growth in adjusted EPS. This was driven by growth across their commercial, government, and diversified business segments.

Anthem is focused on becoming a “lifetime trusted partner in health” through investments in enhancing the customer experience, delivering innovative solutions, and deepening digital engagement. This strategy is helping drive growth across their businesses.

Anthem sees continued momentum in 2022, guiding for at least 12% growth in adjusted EPS. Key drivers include double-digit growth in individual Medicare Advantage, the launch of a large group MA contract, and continued strength in commercial and Medicaid.

Anthem is taking a flexible, partnership-oriented approach to value-based care, investing in risk-bearing primary care providers and aggregators. This helps ensure alignment with providers while maintaining optionality across different care models.

Anthem is accelerating investments in digital capabilities to improve the customer experience and streamline operations. This includes leveraging AI and automation to predict and address adverse health events.

Anthem remains disciplined on capital deployment, targeting programmatic M&A to enhance their existing business and diversify their capabilities. Recent acquisitions like myNEXUS demonstrate this strategy.

Overall, Anthem appears to be executing well on its long-term strategy, balancing near-term performance with investments for the future. The critical eye on analyst questions did not reveal any major concerns, suggesting Anthem is being transparent about the opportunities and challenges it faces.

Earnings Call Analysis 2021 Q4

Anthem Transformation to “Lifetime Trusted Partner in Health”

Anthem is transforming from a health benefits company to a “lifetime trusted partner in health” by addressing the whole person’s needs – physical, behavioral, social, etc. This includes expanding virtual care, digital capabilities, and value-based provider partnerships.

Strong Organic Growth Across Businesses

Anthem is seeing strong organic growth across its Medicaid, Medicare Advantage, and commercial risk-based businesses, offsetting declines in its group fee-based business. This has driven membership to over 45 million.

Investing in Diversified Business Group and IngenioRx

Anthem is investing heavily in its Diversified Business Group and IngenioRx pharmacy business, which are seen as key growth drivers going forward. The company is focused on cross-selling these capabilities across its benefits businesses.

Offsetting COVID-19 Costs

While COVID-19 costs remain elevated, Anthem has been able to offset this through lower non-COVID utilization. The company expects a portion of the COVID headwind to be recovered in 2022.

Cautious on Medicaid Redetermination Process

Anthem is cautious in its commentary on the Medicaid redetermination process, but believes it can retain a significant portion of that membership across its benefits portfolio.

Committed to 12-15% Annual EPS Growth Target

The company remains committed to its 12-15% annual EPS growth target, though 2022 guidance will be impacted by some known headwinds like the new NYC group Medicare Advantage contract.

Overall Execution and Long-Term Outlook

Overall, Anthem appears to be executing well on its strategic transformation, leveraging its scale and diversified capabilities to drive consistent growth. The long-term investor should watch for continued progress on value-based care, digital innovation, and the integration of the company’s diversified assets.

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The information provided on this blog is for informational purposes only and should not be considered as financial advice. You should consult with a qualified financial professional before making any investment decisions. Past performance is not indicative of future results. Investing involves risk, including the potential loss of principal.