Benzinga - by Cory Mitchell, Benzinga Contributor.
Elevance Health's stock price has stagnated in 2023 while indices have rallied. This is despite strong earnings growth, strong expected growth in the future, and an attractive forward Price/Earnings ratio. It is also one of the top dividend stocks for long-term investment based on a steadily increasing dividend and share buybacks.
Elevance Health (NYSE: ELV) is one of the largest healthcare plan providers in the United States, servicing 110 million people through its various products.
The stock is trading nearly 20% below its 52-week high, while the SPDR S&P 500 ETF (ARCA: SPY) and the Healthcare Select Sector SPDR (NYSEArca: XLV) are only about 2% and 6% below their 52-week highs respectively.
The recent price decline in the stock is creating an attractive buy point. Based on the criteria discussed below, even the current price is attractive, but given that the price is moving in a slightly descending trend channel, picking it up near the bottom of that channel between $425 and $400 is even more enticing. Chart courtesy of TradingView.
Here are some of the quality metrics that make this stock stand out.
- Grown earnings per share (EPS) by 10.3% per year over the last five years.
- Expected to grow EPS by 12.7% per year over the next five years based on analyst estimates. The median estimate for S&P 500 stocks is 8.3%, so ELV is expected to grow more than average. Bigger growth generally translates into better stock performance.
- Forward P/E of 11.9 which is one of the lowest forward P/E ratios for the expected growth rate in the industry.
- 1.3% dividend with the dividend amount increasing by an average of 14.7% per year over the last 10 years. Great for investors who want an increasing cash flow each year (or reinvest it back into the stock or other investments).
- Elevance Health regularly buys back stock (2.3% in the last 12 months), which helps bolster share performance over the long term.
- More than a decade of increasing revenue every year, and steadily raising EPS over that period as well with no unprofitable years.
Over the long term, the stock has handily outperformed the S&P 500 averaging returns of 19.5% per year over the last decade, while the S&P 500 averaged 12.7% per year. With the company continuing to produce solid earnings growth, investors may want to consider ELV both for upside potential and a steadily increasing dividend cash flow.
Disclaimer: The author doesn't currently hold a position, but may initiate one below $425 assuming the fundamentals remain as strong as they currently are.
This content is for informational purposes only and is not intended to be investing advice.
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