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โ Dimitry Nakhla | Babylon Capitalยฎ
A sober valuation analysis on $ELV ๐ง๐ฝโโ๏ธ
โขNTM P/E Ratio: 11.52x
โข5-Year Mean: 14.05x
โขNTM FCF Yield: 8.28%
โข5-Year Mean: 6.87%
As you can see, $ELV appears to be trading below fair value
Going forward, investors can expect to receive ~22% MORE in earnings per share & ~20% MORE in FCF per share๐ง ***
Before we get into valuation, letโs take a look at why $ELV is a quality business
BALANCE SHEETโ
โขCash & Equivalents: $7.86B
โขTotal Investments: $40.35B
โขLong-Term Debt: $24.68B
$ELV has a strong balance sheet, an A S&P Credit Rating & 1.93x FFO Interest Coverage Ratio (temporarily lower FFO)
RETURN ON CAPITALโ
โข2019: 12.3%
โข2020: 14.7%
โข2021: 14.3%
โข2022: 13.4%
โข2023: 14.7%
โขLTM: 14.5%
RETURN ON EQUITYโ
โข2019: 16.0%
โข2020: 14.1%
โข2021: 17.7%
โข2022: 16.3%
โข2023: 15.8%
โขLTM: 15.5%
$ELV has solid return metrics, highlighting the financial efficiency of the business
REVENUESโ
โข2013: $71.02B
โข2023: $171.34B
โขCAGR: 9.20%
FREE CASH FLOWโ
โข2013: $2.41B
โข2023: $6.77B
โขCAGR: 10.88%
NORMALIZED EPSโ
โข2013: $8.52
โข2023: $33.14
โขCAGR: 14.54%
SHARE BUYBACKSโ
โข2013 Shares Outstanding: 303.80M
โขLTM Shares Outstanding: 234.10M
By reducing its shares outstanding ~23%, $ELV increases its EPS by ~30% (assuming 0 growth)
MARGINS๐
โขLTM Gross Margins: 9.4%
โขLTM Operating Margins: 6.1%
โขLTM Net Income Margins: 3.7%
PAID DIVIDENDSโ
โข2013: $1.50
โข2023: $5.92
โขCAGR: 14.71%
***NOW TO VALUATION ๐ง
As stated above, investors can expect to receive ~22% MORE in EPS & ~20% MORE in FCF per share
Using Benjamin Grahamโs 2G rule of thumb, $ELV has to grow earnings at a 5.76% CAGR over the next several years to justify its valuation
Today, analysts anticipate 2024 - 2026 EPS growth over the next few years to be greater than the (5.76%) required growth rate:
2024E: $35.36 (6.7% YoY) *FY Dec
2025E: $39.00 (10.3% YoY)
2026E: $44.01 (12.8% YoY)
$ELV has a great track record of meeting analyst estimates ~2 years out, so letโs assume $ELV ends 2026 with $44.01 in EPS & see its CAGR potential assuming different multiples
14x P/E: $616.14๐ต โฆ ~19.1% CAGR
13x P/E: $572.13๐ต โฆ ~15.2% CAGR
12x P/E: $528.12๐ต โฆ ~11.2% CAGR
As you can see, $ELV has attractive CAGR potential if we assume a >12x multiple (below its 14.05x 5-year mean & below its 14.22x 10-year mean)
More importantly, 12x is MORE than reasonable for a business thatโs expected to grow earnings at a >10% rate & has a strong history of linear earnings growth ( $ELV has increased EPS annually since 2008 ๐ฏ)
I also like the negative price correlation $ELV can have, relative to tech, in the short-term โฆ adding a layer of safety in a portfolio
In short, $ELV appears to be a strong consideration at $430๐ต
However, knowing that health insurers often face volatility amid the perception of political risks (among other things), itโs wise to piece in & perhaps be prepared to add a second tranche at lower prices (as Iโve mentioned before)
#stocks #investing
___
๐๐๐๐๐๐๐๐๐๐โผ๏ธ: ๐๐ก๐ข๐ฌ ๐ข๐ฌ ๐๐๐ ๐๐ง๐ฏ๐๐ฌ๐ญ๐ฆ๐๐ง๐ญ ๐๐๐ฏ๐ข๐๐. ๐๐๐๐ฒ๐ฅ๐จ๐ง ๐๐๐ฉ๐ข๐ญ๐๐ฅยฎ ๐๐ง๐ ๐ข๐ญ๐ฌ ๐ซ๐๐ฉ๐ซ๐๐ฌ๐๐ง๐ญ๐๐ญ๐ข๐ฏ๐๐ฌ ๐ฆ๐๐ฒ ๐ก๐๐ฏ๐ ๐ฉ๐จ๐ฌ๐ข๐ญ๐ข๐จ๐ง๐ฌ ๐ข๐ง ๐ญ๐ก๐ ๐ฌ๐๐๐ฎ๐ซ๐ข๐ญ๐ข๐๐ฌ ๐๐ข๐ฌ๐๐ฎ๐ฌ๐ฌ๐๐ ๐ข๐ง ๐ญ๐ก๐ข๐ฌ ๐ญ๐ฐ๐๐๐ญ.
๐๐ก๐ ๐ข๐ง๐๐จ๐ซ๐ฆ๐๐ญ๐ข๐จ๐ง ๐๐จ๐ง๐ญ๐๐ข๐ง๐๐ ๐ข๐ง ๐ญ๐ก๐ข๐ฌ ๐ญ๐ฐ๐๐๐ญ ๐ข๐ฌ ๐ข๐ง๐ญ๐๐ง๐๐๐ ๐๐จ๐ซ ๐ข๐ง๐๐จ๐ซ๐ฆ๐๐ญ๐ข๐จ๐ง๐๐ฅ ๐ฉ๐ฎ๐ซ๐ฉ๐จ๐ฌ๐๐ฌ ๐จ๐ง๐ฅ๐ฒ ๐๐ง๐ ๐ฌ๐ก๐จ๐ฎ๐ฅ๐ ๐ง๐จ๐ญ ๐๐ ๐๐จ๐ง๐ฌ๐ญ๐ซ๐ฎ๐๐ ๐๐ฌ ๐ข๐ง๐ฏ๐๐ฌ๐ญ๐ฆ๐๐ง๐ญ ๐๐๐ฏ๐ข๐๐ ๐ญ๐จ ๐ฆ๐๐๐ญ ๐ญ๐ก๐ ๐ฌ๐ฉ๐๐๐ข๐๐ข๐ ๐ง๐๐๐๐ฌ ๐จ๐ ๐๐ง๐ฒ ๐ข๐ง๐๐ข๐ฏ๐ข๐๐ฎ๐๐ฅ ๐จ๐ซ ๐ฌ๐ข๐ญ๐ฎ๐๐ญ๐ข๐จ๐ง. ๐๐๐ฌ๐ญ ๐ฉ๐๐ซ๐๐จ๐ซ๐ฆ๐๐ง๐๐ ๐ข๐ฌ ๐ง๐จ ๐ ๐ฎ๐๐ซ๐๐ง๐ญ๐๐ ๐จ๐ ๐๐ฎ๐ญ๐ฎ๐ซ๐ ๐ซ๐๐ฌ๐ฎ๐ฅ๐ญ๐ฌ.
๐๐ง๐๐จ๐ซ๐ฆ๐๐ญ๐ข๐จ๐ง ๐๐จ๐ง๐ญ๐๐ข๐ง๐๐ ๐ข๐ง ๐ญ๐ก๐ข๐ฌ ๐ญ๐ฐ๐๐๐ญ ๐ก๐๐ฌ ๐๐๐๐ง ๐จ๐๐ญ๐๐ข๐ง๐๐ ๐๐ซ๐จ๐ฆ ๐ฌ๐จ๐ฎ๐ซ๐๐๐ฌ ๐๐๐ฅ๐ข๐๐ฏ๐๐ ๐ญ๐จ ๐๐ ๐ซ๐๐ฅ๐ข๐๐๐ฅ๐, ๐๐ฎ๐ญ ๐ข๐ฌ ๐ง๐จ๐ญ ๐ ๐ฎ๐๐ซ๐๐ง๐ญ๐๐๐ ๐๐ฌ ๐ญ๐จ ๐๐จ๐ฆ๐ฉ๐ฅ๐๐ญ๐๐ง๐๐ฌ๐ฌ ๐จ๐ซ ๐๐๐๐ฎ๐ซ๐๐๐ฒ.
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A sober valuation analysis on $ELV ๐ง๐ฝโโ๏ธ
โขNTM P/E Ratio: 11.52x
โข5-Year Mean: 14.05x
โขNTM FCF Yield: 8.28%
โข5-Year Mean: 6.87%
As you can see, $ELV appears to be trading below fair value
Going forward, investors can expect to receive ~22% MORE in earnings per share & ~20% MORE in FCF per share๐ง ***
Before we get into valuation, letโs take a look at why $ELV is a quality business
BALANCE SHEETโ
โขCash & Equivalents: $7.86B
โขTotal Investments: $40.35B
โขLong-Term Debt: $24.68B
$ELV has a strong balance sheet, an A S&P Credit Rating & 1.93x FFO Interest Coverage Ratio (temporarily lower FFO)
RETURN ON CAPITALโ
โข2019: 12.3%
โข2020: 14.7%
โข2021: 14.3%
โข2022: 13.4%
โข2023: 14.7%
โขLTM: 14.5%
RETURN ON EQUITYโ
โข2019: 16.0%
โข2020: 14.1%
โข2021: 17.7%
โข2022: 16.3%
โข2023: 15.8%
โขLTM: 15.5%
$ELV has solid return metrics, highlighting the financial efficiency of the business
REVENUESโ
โข2013: $71.02B
โข2023: $171.34B
โขCAGR: 9.20%
FREE CASH FLOWโ
โข2013: $2.41B
โข2023: $6.77B
โขCAGR: 10.88%
NORMALIZED EPSโ
โข2013: $8.52
โข2023: $33.14
โขCAGR: 14.54%
SHARE BUYBACKSโ
โข2013 Shares Outstanding: 303.80M
โขLTM Shares Outstanding: 234.10M
By reducing its shares outstanding ~23%, $ELV increases its EPS by ~30% (assuming 0 growth)
MARGINS๐
โขLTM Gross Margins: 9.4%
โขLTM Operating Margins: 6.1%
โขLTM Net Income Margins: 3.7%
PAID DIVIDENDSโ
โข2013: $1.50
โข2023: $5.92
โขCAGR: 14.71%
***NOW TO VALUATION ๐ง
As stated above, investors can expect to receive ~22% MORE in EPS & ~20% MORE in FCF per share
Using Benjamin Grahamโs 2G rule of thumb, $ELV has to grow earnings at a 5.76% CAGR over the next several years to justify its valuation
Today, analysts anticipate 2024 - 2026 EPS growth over the next few years to be greater than the (5.76%) required growth rate:
2024E: $35.36 (6.7% YoY) *FY Dec
2025E: $39.00 (10.3% YoY)
2026E: $44.01 (12.8% YoY)
$ELV has a great track record of meeting analyst estimates ~2 years out, so letโs assume $ELV ends 2026 with $44.01 in EPS & see its CAGR potential assuming different multiples
14x P/E: $616.14๐ต โฆ ~19.1% CAGR
13x P/E: $572.13๐ต โฆ ~15.2% CAGR
12x P/E: $528.12๐ต โฆ ~11.2% CAGR
As you can see, $ELV has attractive CAGR potential if we assume a >12x multiple (below its 14.05x 5-year mean & below its 14.22x 10-year mean)
More importantly, 12x is MORE than reasonable for a business thatโs expected to grow earnings at a >10% rate & has a strong history of linear earnings growth ( $ELV has increased EPS annually since 2008 ๐ฏ)
I also like the negative price correlation $ELV can have, relative to tech, in the short-term โฆ adding a layer of safety in a portfolio
In short, $ELV appears to be a strong consideration at $430๐ต
However, knowing that health insurers often face volatility amid the perception of political risks (among other things), itโs wise to piece in & perhaps be prepared to add a second tranche at lower prices (as Iโve mentioned before)
#stocks #investing
___
๐๐๐๐๐๐๐๐๐๐โผ๏ธ: ๐๐ก๐ข๐ฌ ๐ข๐ฌ ๐๐๐ ๐๐ง๐ฏ๐๐ฌ๐ญ๐ฆ๐๐ง๐ญ ๐๐๐ฏ๐ข๐๐. ๐๐๐๐ฒ๐ฅ๐จ๐ง ๐๐๐ฉ๐ข๐ญ๐๐ฅยฎ ๐๐ง๐ ๐ข๐ญ๐ฌ ๐ซ๐๐ฉ๐ซ๐๐ฌ๐๐ง๐ญ๐๐ญ๐ข๐ฏ๐๐ฌ ๐ฆ๐๐ฒ ๐ก๐๐ฏ๐ ๐ฉ๐จ๐ฌ๐ข๐ญ๐ข๐จ๐ง๐ฌ ๐ข๐ง ๐ญ๐ก๐ ๐ฌ๐๐๐ฎ๐ซ๐ข๐ญ๐ข๐๐ฌ ๐๐ข๐ฌ๐๐ฎ๐ฌ๐ฌ๐๐ ๐ข๐ง ๐ญ๐ก๐ข๐ฌ ๐ญ๐ฐ๐๐๐ญ.
๐๐ก๐ ๐ข๐ง๐๐จ๐ซ๐ฆ๐๐ญ๐ข๐จ๐ง ๐๐จ๐ง๐ญ๐๐ข๐ง๐๐ ๐ข๐ง ๐ญ๐ก๐ข๐ฌ ๐ญ๐ฐ๐๐๐ญ ๐ข๐ฌ ๐ข๐ง๐ญ๐๐ง๐๐๐ ๐๐จ๐ซ ๐ข๐ง๐๐จ๐ซ๐ฆ๐๐ญ๐ข๐จ๐ง๐๐ฅ ๐ฉ๐ฎ๐ซ๐ฉ๐จ๐ฌ๐๐ฌ ๐จ๐ง๐ฅ๐ฒ ๐๐ง๐ ๐ฌ๐ก๐จ๐ฎ๐ฅ๐ ๐ง๐จ๐ญ ๐๐ ๐๐จ๐ง๐ฌ๐ญ๐ซ๐ฎ๐๐ ๐๐ฌ ๐ข๐ง๐ฏ๐๐ฌ๐ญ๐ฆ๐๐ง๐ญ ๐๐๐ฏ๐ข๐๐ ๐ญ๐จ ๐ฆ๐๐๐ญ ๐ญ๐ก๐ ๐ฌ๐ฉ๐๐๐ข๐๐ข๐ ๐ง๐๐๐๐ฌ ๐จ๐ ๐๐ง๐ฒ ๐ข๐ง๐๐ข๐ฏ๐ข๐๐ฎ๐๐ฅ ๐จ๐ซ ๐ฌ๐ข๐ญ๐ฎ๐๐ญ๐ข๐จ๐ง. ๐๐๐ฌ๐ญ ๐ฉ๐๐ซ๐๐จ๐ซ๐ฆ๐๐ง๐๐ ๐ข๐ฌ ๐ง๐จ ๐ ๐ฎ๐๐ซ๐๐ง๐ญ๐๐ ๐จ๐ ๐๐ฎ๐ญ๐ฎ๐ซ๐ ๐ซ๐๐ฌ๐ฎ๐ฅ๐ญ๐ฌ.
๐๐ง๐๐จ๐ซ๐ฆ๐๐ญ๐ข๐จ๐ง ๐๐จ๐ง๐ญ๐๐ข๐ง๐๐ ๐ข๐ง ๐ญ๐ก๐ข๐ฌ ๐ญ๐ฐ๐๐๐ญ ๐ก๐๐ฌ ๐๐๐๐ง ๐จ๐๐ญ๐๐ข๐ง๐๐ ๐๐ซ๐จ๐ฆ ๐ฌ๐จ๐ฎ๐ซ๐๐๐ฌ ๐๐๐ฅ๐ข๐๐ฏ๐๐ ๐ญ๐จ ๐๐ ๐ซ๐๐ฅ๐ข๐๐๐ฅ๐, ๐๐ฎ๐ญ ๐ข๐ฌ ๐ง๐จ๐ญ ๐ ๐ฎ๐๐ซ๐๐ง๐ญ๐๐๐ ๐๐ฌ ๐ญ๐จ ๐๐จ๐ฆ๐ฉ๐ฅ๐๐ญ๐๐ง๐๐ฌ๐ฌ ๐จ๐ซ ๐๐๐๐ฎ๐ซ๐๐๐ฒ.
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Offshore
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โ Stock Analysis Compilation
Vltava Fund on Brookfield Corporation $BN
Thesis: Brookfield Corporation, with its massive global asset management business and strong infrastructure holdings, presents an attractive long-term investment with a 15% projected annual growth rate
(Extract from their Q3 letter) https://t.co/NaJZN0jjfz
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Vltava Fund on Brookfield Corporation $BN
Thesis: Brookfield Corporation, with its massive global asset management business and strong infrastructure holdings, presents an attractive long-term investment with a 15% projected annual growth rate
(Extract from their Q3 letter) https://t.co/NaJZN0jjfz
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โ iinvested
3Q'24 Third Avenue Small-Cap Value Fund on $SD, $PBF
More fund letters here:
https://t.co/ccjFhSQnS3 https://t.co/IwDxy8wYjU
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3Q'24 Third Avenue Small-Cap Value Fund on $SD, $PBF
More fund letters here:
https://t.co/ccjFhSQnS3 https://t.co/IwDxy8wYjU
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โ Quiver Quantitative
This keeps getting wilder.
We posted this report last month.
$HL has now risen 48% since the trade.
It's up another 2% today. https://t.co/OYL00XfaUF
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This keeps getting wilder.
We posted this report last month.
$HL has now risen 48% since the trade.
It's up another 2% today. https://t.co/OYL00XfaUF
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โ Value Spotlight (Andrew Sather)
Tutorial: Stock-based compensation and Growth estimates from ROIC
$CRM https://t.co/fSOv2LyjBp
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Tutorial: Stock-based compensation and Growth estimates from ROIC
$CRM https://t.co/fSOv2LyjBp
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