DCF Studio

    ELV · NYQ · Healthcare

    Elevance Health, Inc.

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD 660.67

    Market price

    USD 410.95

    Implied upside

    +60.8%

    5-year forecast · Perpetuity growth terminal value · Mid-year discounting · Base case

    AdjustedReported capital expenditure averages just 0.69% of revenue, which is too low to be the company's real investment - property trusts and similar structures invest through lines that are not reported as capex. Capex has been set to 1.00% of revenue so the forecast is not handed free growth. The accounts do not separate depreciation from amortisation, so the combined charge is used - if a large part of it is amortisation of an acquisition, the reported capex is probably right and this substitution is not. Override it if the reported figure is right.

    Value Per Share

    Perpetuity growth
    USD 660.67+60.8%
    Exit multiple
    USD 626.30+52.4%
    Market price
    USD 410.95

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0bn4bn8bnFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 215.7bnUSD 233.7bnUSD 253.2bnUSD 274.3bnUSD 297.2bn+8.3%
    EBITUSD 10.6bnUSD 11.5bnUSD 12.5bnUSD 13.5bnUSD 14.6bn+8.3%
    NOPATUSD 8.4bnUSD 9.1bnUSD 9.9bnUSD 10.7bnUSD 11.6bn+8.3%
    Add depreciation & amortisationUSD 2.0bnUSD 2.1bnUSD 2.3bnUSD 2.5bnUSD 2.7bn+8.3%
    Less capital expenditureUSD -2.2bnUSD -2.3bnUSD -2.5bnUSD -2.7bnUSD -3.0bn+8.3%
    Less increase in working capitalUSD -2.4bnUSD -2.6bnUSD -2.9bnUSD -3.1bnUSD -3.4bn+8.3%
    Free cashflow to firmUSD 5.8bnUSD 6.3bnUSD 6.8bnUSD 7.3bnUSD 8.0bn+8.3%
    Discount factor0.96250.89170.82610.76530.7090-
    Present valueUSD 5.6bnUSD 5.6bnUSD 5.6bnUSD 5.6bnUSD 5.6bn+0.4%
    Present Value Of The ForecastUSD 28.0bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta0.796Reported 0.696, pulled toward 1.0 (Blume)
    Cost of equity9.38%Risk-free + beta x equity risk premium
    Cost of debt5.00%Floored at the risk-free rate (implied cost of debt was lower)
    Market capitalisationUSD 89.1bn73.6% of capital
    Total debtUSD 32.0bn26.4% of capital, book value as a proxy
    Tax rate21.0%Effective, capped at statutory
    WACC7.94%E/V x Re + D/V x Rd x (1 - t)

    Terminal Value

    Perpetuity growth is intrinsic. The exit multiple defaults to the company's current EV/EBITDA, so it answers a different question - what the shares are worth if today's rating holds and EBITDA grows as forecast.

    Perpetuity growth at 2.50%

    Value per shareUSD 660.67

    81% of EV

    Forecast FCFF, final year
    USD 8.0bn
    Capex at depreciation, working capital in reinvestment
    USD 11.6bn
    Less reinvestment at g/ROIC (24.2% of NOPAT)
    USD -2.8bn
    Capitalised
    USD 8.8bn
    ROIC (reported)
    10.3%
    Terminal value, undiscounted
    USD 165.1bn
    Terminal value, discounted
    USD 117.1bn
    Enterprise value
    USD 145.1bn
    Less net debt
    USD -3.3bn
    Equity value
    USD 148.4bn

    Exit at 8.9x EBITDA

    Value per shareUSD 626.30

    80% of EV

    Terminal value, undiscounted
    USD 154.2bn
    Terminal value, discounted
    USD 109.3bn
    Enterprise value
    USD 137.3bn
    Less net debt
    USD -3.3bn
    Equity value
    USD 140.7bn

    Spread between methods: 5%.

    Sensitivity

    Value per share (USD) by discount rate and long-run growth.

    Long-run growth
    Discount rate1.50%2.00%2.50%3.00%3.50%
    5.94%921.40974.271041.931131.941258.03
    6.94%749.53776.12808.28848.14899.03
    7.94%631.29644.89660.67679.28701.69
    8.94%545.05551.66559.02567.34576.88
    9.94%479.44482.06484.80487.71490.82

    Outlined: this model. Green text: above today's price of 410.95. Shading: distance from this model's own value.

    Priced In

    What each input would have to be to justify the current price, one at a time.

    InputModelImpliedGap
    Revenue growth, every year8.3%-6.6%-14.9pp
    EBIT margin4.9%3.2%-1.8pp
    Discount rate7.9%11.5%+3.6pp
    Download as Excel

    Live formulas, not pasted numbers - edit a driver and the workbook reprices.

    Yahoo Finance and RBA data. General information, not advice. Methodology.