Anthem, Inc. (ANTM) has retreated slightly over the past year owing to industry headwinds. Medical insurance companies have been deeply affected in two spheres – the lower number of employer sponsored insurance policies due to lay-offs, and reduced income from annuity sales due to the near-zero interest rates. .
Since there has been no major improvement on the unemployment front of late and with a continuing low interest rate environment over the past few months, ANTM has declined 11.9% over the past three months and 13.2% over the past month.
However, ANTM has been taking active steps to regain momentum in a recovering economy through acquisitions and leadership changes. The following factors should shape ANTM’s performance in 2021:
Improved Leadership and Business Expansion
In January , ANTM named Dr. Shantanu Agrawal as the Chief Health Officer. The company expects to improve its “whole person care” segment and lower its cost of operations by streamlining its operations under new leadership.
The company appointed Blair Todt as Executive Vice President and Chief Legal Officer on November 30 last year. With Todt’s extensive healthcare background and compliance and regulatory experience, ANTM is expected to strengthen its corporate governance under. Todt’s leadership. This month , ANTM appointed Stephen Tanal as Vice President, Investor Relations. Tanal is a well-known and widely respected member of the Wall Street community.
And this month, On February 2nd, ANTM expanded its business operations to Puerto Rico by entering into an acquisition agreement with InnovaCare Health L.P. Under the agreement, ANTM acquired InnovaCare’s Puerto Rico based subsidiaries, MMM Holdings, Medicare Advantage plan, and MMM Healthcare and Medicaid plan. The acquisition gives ANTM access to Puerto Rico’s largest Medical Advantage plan, as well as to one of the fastest growing vertically integrated healthcare organizations in the U.S.
Trading at a Discounted Valuation
In terms of its non-GAAP forward p/e, ANTM is currently trading at 11.77x, 55.8% lower than the industry average 26.63x. ANTM’s non-GAAP forward PEG ratio of 0.83 is 64.6% lower than the industry average of 2.35.
Also, the company’s forward price/sales and price/cash flow ratios of 0.54x and 13.49x, respectively, compare favorably with the respective industry averages.
Robust Financials and Growth Prospects
ANTM has generated $121.87 billion in revenues over the past year. The company has a net income margin of $4.57 billion and EPS of $17.98 in its trailing 12-months. Moreover, ANTM’s revenue, net income and EPS have increased at CAGRs of 10.6%, 6% and 7.8%, respectively, over the past three years. The company reported gross profit of $33.82 billion, indicating a gross profit margin of 27.75%. ANTM’s leveraged cash flow margin of 5.22% is 160.8% higher than the industry average 2%.
Moreover, ANTM’s net income, ROE and ROA margins of 3.75%, 14.08% and 5.28%, respectively, compare favorably with the negative industry averages.
A consensus EPS estimate of $24.85 for the current year represents a 10.5% improvement year-over-year. The consensus revenue estimate of $134.30 billion represents an 11.2% rise from the same period last year.
Price Target Reflects Potential Upside
ANTM is currently trading 14.8% below its all-time high of $340.98, which it hit on January 11. Analysts expect the stock to gain 20.5% to hit a fresh high of $352.83 soon.
POWR Ratings Show Promise
ANTM has an overall rating of B, which equates to Buy in our proprietary POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors with the weighting of each optimized to improve overall performance.
Our proprietary rating system evaluates each stock on a total eight different categories. The stock has a grade of B for Value and Stability, which is justified, given its discounted valuation and sturdy financial performance.
ANTM is currently ranked #5 of 9 stocks in the A-rated Medical – Health Insurance industry. Click here to see additional ANTM Ratings for Growth, Momentum, Sentiment and Quality.
There are five other stocks in the Medical - Health Insurance industry with an overall rating of A or B. Click here to see them.
Bottom Line
ANTM is expected to stand out among its peers in the Medical Insurance industry owing to its improved corporate governance and business expansion policies. As the unemployment rates in the country declines with economic reopening, the ESI insurance segment is expected to witness a significant rise, driving ANTM’s performance. The unemployment rate declined slightly in January to 6.3%, beating the consensus estimates of 6.7%. As the country adds jobs, we think the demand for medical coverage is bound to rise, paving the way for ANTM to reach new highs.
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ANTM shares were trading at $290.03 per share on Tuesday morning, down $0.65 (-0.22%). Year-to-date, ANTM has declined -9.67%, versus a 5.04% rise in the benchmark S&P 500 index during the same period.
About the Author: Aditi Ganguly
Aditi is an experienced content developer and financial writer who is passionate about helping investors understand the do’s and don'ts of investing. She has a keen interest in the stock market and has a fundamental approach when analyzing equities.
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