ELEVANCE HEALTH, INC. (ELV): what the price requires

At today's price, ELEVANCE HEALTH, INC. (ELV) is priced for 13.2% return on equity. boothcheck doesn't publish a fair value or a price target; it shows what the price assumes, so you can judge whether that bar is too high.

Generated: 2026-07-14 · Exported: 2026-07-17 · Source: https://boothcheck.com/report/ELV

Headline

FieldValue
TickerELV
CompanyELEVANCE HEALTH, INC.
Current price$425.05/sh
CompositionHealth Benefits 84% / CarelonRx 12% / Carelon Services 4%

What The Price Requires (Inversion)

The assumption today's price embeds, recovered by inverting the valuation.

FieldValue
Inversion basisfinancials
Return on equity needed13.2%
Return on equity now12.9%
ROE gap+0.3pp
Price-to-book2.10x

Solve inputs: computed at a 8.4% cost of equity with 4% terminal growth over a 5-year stage, on common book equity (FY2026); each 1pp of cost of equity moves the implied ROE ~2.1pp.

How unusual the bet is: within-range

ReferenceValue
vs own history-0.04σ
cohort percentile (of 80 peers)58
sustained it ~10 years at this level66%
implied end-window share0%

Valuation X-Ray

Asset, earnings-power and peer-multiple models all land far below the price; ONLY the growth-DCF reaches it. The bet is durable compounding the static frames structurally cannot price (a moat/durability premium).

How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.

FamilyMedian price/FVModelsReads
Asset1.46x5expensive
Earnings1.67x5expensive
Relative1.50x5expensive
Growth0.65x3justifies

Families that justify the price: Growth Families that call it expensive: Earnings, Relative

The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 7.1%); the inversion above states its own rate.

Per-Model Detail (n=18)

ModelFamilyFVPrice/FVApplicableMethodology
DCF Perpetual GrowthGrowth$1189.890.36xyesFCF base $6.8B, growth 9% (input: historical growth), terminal g 4.0%, WACC 7.1%, 6yr projection
DCF Exit MultipleGrowth$658.580.65xyesExit EV/EBITDA: 16.9x / 18.9x / 20.9x (bear / base = today's held flat / bull), 6yr
Relative ValuationRelative$356.711.19xyesP/E 17x (static sector reference · 2026-04), scenarios: 14.2x / 17.0x / 19.8x (bear / base = reference held flat / bull), EV/EBITDA 13.38x
Simple DDMGrowth——no—
Two-Stage DDMGrowth——no—
Simple Excess ReturnAsset$257.171.65xyesBV/sh $199.19, ROE (TTM) 11.9%, ke 9.3%
Two-Stage Excess ReturnAsset$290.541.46xyes5yr excess ROE then converge to ke=9.3%
Discounted Future Market CapGrowth$416.361.02xyesRev $200.4B, growth 9% (input: historical growth; tapered), Terminal P/S: 0.4x / 0.5x / 0.5x (bear / base = today's held flat / bull, cap 8x)
Peter Lynch Fair ValueRelative$283.201.50xyesEPS $23.60, growth 5% (input: historical EPS growth), PEG=3.61 (Overvalued)
Margin TrajectoryGrowth——no—
Earnings Power ValueEarnings$327.721.30xyesNormalized EBIT (5y avg op income, one-time charges added back) $8.03B × (1−24%) / WACC 7.1% → EPV (no growth)
Residual IncomeAsset$297.271.43xyesBV $199.19 + 5yr PV of (ROE (TTM) 11.9% − Kₑ 9.3%) × BV; BV grows 7.8%/yr
Graham NumberAsset$325.221.31xyes√(22.5 × EPS $23.60 × BVPS $199.19) — Graham's conservative floor
EV/EBITDA RelativeRelative$204.542.08xyesEBITDA $6.12B × sector EV/EBITDA 11.0x
FCF YieldEarnings$215.721.97xyesFCF $6450.0M / Kₑ 9.3% — zero-growth perpetuity
SBC-Adj FCF YieldEarnings$203.462.09xyesSBC-adj FCF $6.20B (FCF $6.45B − SBC $0.25B) capitalized at Kₑ
Ben Graham FormulaEarnings$364.041.17xyesEPS $23.60 × (8.5 + 2×5.0%) × (4.4 / 5.3%)
ROIC-Justified P/BAsset$67.456.30xyesBV $199.19 × (ROIC 2.4% / WACC 7.1%)
P/Sales SectorRelative$636.530.67xyesRevenue $200.41B × sector P/S 0.7x
PEG Fair ValueRelative$175.332.42xyesEPS $23.60 × (PEG 1.5 × growth 5.0% (input: historical EPS growth)) → PE 7.4x
Earnings YieldEarnings$255.141.67xyesEPS $23.60 / required return 9.3% (Rf 4.3% + ERP 5.0%)
Funds From Operations MultipleRelative——no—
Clinical Phase NPVGrowth——no—
MertonAsset——no—
V5 Mechanical———no—

Solvency

FieldValue
Share count CAGR (buyback)-2.6%

Deposit/float-funded balance sheet: debt is funding, not corporate leverage, and GAAP operating cash flow follows loan flows. Net-debt, interest-coverage, and cash-burn lenses do not apply. The solvency frame for a financial is regulatory capital and payout capacity (CET1, stress buffer, dividends plus buybacks against earnings).

Bullet Takeaways

Bull Case

The cleanest way into Elevance is the direction the earnings line is moving, because the stock spent 2025 pricing in a margin spiral and the first quarter of 2026 argued the spiral has stopped. Operating revenue came in around $49.5 billion against roughly $48.3 billion expected, and adjusted diluted EPS of $12.58 beat consensus near $10.80 by more than 16 percent. That is not a small beat in a managed-care name where the entire debate is cost trend. Management did not trim into it; it raised full-year adjusted EPS guidance to at least $26.75 and reaffirmed operating cash flow of at least $5.5 billion. After a year in which the shares fell sharply, a beat-and-raise on the metric that matters most is the strongest signal the trajectory has inflected.

The business mix supports that inflection. Health Benefits is about 84 percent of the company, but the Carelon platform, CarelonRx pharmacy at 12 percent and Carelon Services at 4 percent, is the growth and margin engine that diversifies away from pure underwriting. Elevance frames its own performance drivers in its filing around membership levels, premium pricing, medical cost trend, network performance, and risk-adjustment accuracy, the levers it controls to underwrite profitably (ELV FY2025 10-K, accession 0001156039-26-000013), and management is explicit about expanding the services side. The scale here is real: at roughly $200 billion of revenue, Elevance sits in the top tier of managed care alongside UnitedHealth, Humana, and Cigna, and that scale buys negotiating leverage with providers and a data advantage in pricing risk.

Valuation gives the trajectory room to work. At about 1.9 times book the price assumes a sustainable ROE near 12.5 percent, just below the roughly 12.9 percent the company has recently earned, so the embedded expectation is not heroic. The sell side has moved with the earnings recovery: the consensus rating is buy with targets clustering well above the price, JPMorgan at $476, Mizuho at $465, and Barclays at $480. The bull case is straightforward. Buy a scaled, cash-generative insurer at a normal multiple of book, just as the earnings line turns up and pricing begins to catch cost trend, with the analyst community already underwriting a recovery toward double-digit EPS growth.

Bear Case

The bear case is about how much of the recovery is already a promise rather than a result. At $388.60 (June 27, 2026) the price embeds a sustainable ROE near 12.5 percent and a price-to-book in the upper half of the peer group, and that figure rests on a single fragile assumption: that the medical cost ratio normalizes on schedule. The first-quarter benefit-expense ratio of 86.8 percent was up 40 basis points year over year, and Elevance itself describes Medicaid seasonality and rising benefit costs as members satisfy deductibles and out-of-pocket maximums through the year, with commercial costs that climb as the year progresses (ELV FY2025 10-K, accession 0001156039-26-000013). The most fragile revenue-and-margin stream in the model is Medicaid, where margin guidance is still around negative 1.75 percent with high-single-digit membership decline assumed. If rate adequacy lags utilization the way it did in 2025, the raised guidance becomes a target the company chases rather than clears.

The second dependency is regulatory, and it is not hypothetical. GAAP diluted EPS for the quarter was only $8.00 against the $12.58 adjusted figure, the gap driven by a $935 million accrual tied to a CMS matter. That is a reminder that a managed-care company's reported earnings can be hostage to government decisions on rates, risk adjustment, and audits in a way no operating improvement fully insulates. Medicare Advantage rate trajectory, Medicaid redetermination dynamics, and CMS enforcement all sit outside management's control yet directly determine whether the 12.5 percent ROE the price assumes is achievable.

The third issue is what the static valuation frames say once you strip out the forward-growth story. Only the growth-DCF family reaches the price; the asset, earnings-power, and peer-multiple methods all read richly valued. The two-stage excess-return model lands near $291, earnings power value near $336, and the Peter Lynch read flags overvaluation at a PEG above 3. Trailing ROE of about 11.9 percent already sits only modestly above the 9.3 percent cost of equity, so the excess-return cushion is thin. The price is a bet that durable compounding resumes, and the recent record, a roughly 30 percent drawdown over the prior year, shows how quickly that bet can unwind when cost trend surprises to the upside. The improvement is one good quarter into a multi-year repair, and the price is already paying for the repair to hold.

Valuation

An insurer is worth the return it earns on its capital, so Elevance is read off price-to-book rather than an operating multiple. At today's $388.60 the market is paying about 1.9 times book and assuming a sustainable return on equity near 12.5 percent, computed at an 8.4 percent cost of equity with 4 percent terminal growth over a five-year stage. For reference the company has recently been earning about 12.9 percent, so the assumed return is within reach of its own record. Against peers the price-to-book sits in the upper half of the managed-care group, and historically only about 68 percent of firms earning this return sustained it for a decade. The net read is within range: demanding but not detached from what the business produces.

The X-ray shows the familiar growth-versus-static split. The forward-growth methods sit far above the price, with perpetual-growth DCF near $1,254 and exit-multiple DCF near $625 on roughly 9 percent historical growth, while the discounted future market cap lands near $381, essentially at the price. The static frames cluster lower: the two-stage excess-return model near $291, residual income near $297, Graham number near $325, and earnings power value near $336. The relative-valuation read at about $351 on a 17 times sector P/E is the closest peer anchor.

The synthesis is that the inversion and the analyst consensus both land above the current price, the inversion midpoint near $418 and the consensus targets ranging from the mid-$400s to $480, while the static valuation floor sits in the low-to-mid $300s. The gap between those is the recovery the market is underwriting. The deciding variable is the medical cost ratio and the regulatory rate environment, not the multiple. Buy it if you believe pricing catches cost trend and the 12.5 percent ROE holds; the price is reasonable on that assumption and stretched without it.

Catalysts

The first-quarter 2026 report on April 22 was the pivotal recent catalyst. Operating revenue of about $49.5 billion and adjusted EPS of $12.58 beat consensus by more than 16 percent, the benefit-expense ratio came in at 86.8 percent, and management raised full-year adjusted EPS guidance to at least $26.75 while reaffirming operating cash flow of at least $5.5 billion. GAAP EPS of $8.00 carried a $935 million accrual tied to a CMS matter, so the resolution of that matter and the trajectory of the medical cost ratio through the year are the next things to watch.

The dominant forward catalysts are regulatory and cost-trend driven. Medicaid margin guidance near negative 1.75 percent with high-single-digit membership decline means rate adequacy across state Medicaid programs is the swing factor, and management has flagged that underlying cost trend remains elevated with rates running slightly below trend. Medicare Advantage rate updates are the offsetting tailwind that analysts see positioning the company toward a 2027 target of at least 12 percent adjusted EPS growth if margin pressure eases. Sentiment has turned constructive after the beat: the consensus rating is buy, and JPMorgan, Mizuho, and Barclays all carry targets in the mid-$400s to $480 range, well above the current price. The next quarterly print and any CMS-matter update are the near-term tests of whether the recovery guidance holds.

Sources: StockTitan ELV Q1 2026 10-Q, Tickeron ELV Q1 2026 recap, Modern Healthcare Medicaid margins, Motley Fool Q1 2026 transcript.

Peer Cohorts (Per Segment, With Filing Citations)

Health Benefits (reported)

CarelonRx (reported)

Carelon Services (reported)

Methodology Note

Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.

View the full interactive ELV report on boothcheck