We recently compiled a list of the 12 Cheap Healthcare Stocks to Buy Heading into 2025.In this article, we are going to take a look at where Elevance Health, Inc. (NYSE:ELV) stands against the other cheap healthcare stocks.
Investing in healthcare equities is typically seen as protective during recessionary times. This is because, even in hard financial times, consumers usually do not reduce their usage of prescription drugs or other necessary healthcare services. National healthcare spending is expected to reach an estimated $4.8 trillion in 2023 and increase at a 5.6% annual pace between 2027 and 2032, according to the Centers for Medicare and Medicaid Services (CMS).
According to a World Health Organization report published in December 2023, worldwide healthcare spending reached a record high in 2021 at $9.8 trillion, or 10.3% of global GDP. Except in low-income countries, where government health spending declined as a result of their significant reliance on foreign aid, public health spending increased globally. While 11% of the world’s population lived in countries where yearly healthcare spending was less than $50 per person, high-income countries paid about $4,000 per capita in 2021. Additionally, low-income countries accounted for just 0.24% of global health spending, despite having 8% of the world’s population. The study claims that although public health spending rose dramatically during the peak of the COVID-19 epidemic, this increase is unlikely to last in the long term as countries now place a higher priority on economic problems such as high inflation, decreasing GDP, and mounting debt servicing. According to Dr. Bruce Aylward, WHO Assistant Director-General for Universal Health Coverage, Life Course:
“Sustained public financing on health is urgently needed to progress towards universal health coverage. It is especially critical at this time when the world is confronted by the climate crisis, conflicts, and other complex emergencies. People’s health and well-being need to be protected by resilient health systems that can also withstand these shocks.”
The impending collapse of the U.S. healthcare system, especially in terms of staff shortages and financial instability, is the most worrisome aspect of the healthcare sector. There is a serious manpower shortage in the healthcare sector. An additional 124,000 doctors are expected to be required by 2030, and by 2027, 800,000 registered nurses (RNs) are expected to retire. A startling 24% of staff registered nurses are currently leaving their jobs. In certain healthcare systems, this deficit has resulted in the shutdown of critical patient services like obstetrics, pediatrics, psychiatry, and intensive care units.
Nevertheless, the U.S. spends over twice as much on healthcare as the OECD average, despite these difficulties, and the average results are poorer. This discrepancy emphasizes how ineffective and unsustainable the current system is. Further taxing the revenue cycle and reducing the amount of money available for therapeutic treatments is the fact that 58% of hospital bad debt originates from insured patients. The future of the American healthcare system appears bleak when these elements are taken together. The industry faces a systemic collapse that could have serious repercussions for the economy and public health if substantial intervention and reform are not implemented.
Our methodology involved selecting stocks with a market capitalization exceeding $10 billion and a price-to-earnings (P/E) ratio below 17. We then ranked these stocks based on their P/E ratios, as of December 22.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A medical professional working at a computer, utilizing the company’s digital solutions to improve care quality for consumers.
P/E Ratio: 13.62
Elevance Health, Inc. (NYSE:ELV), formerly Anthem, Inc., is a leading U.S. health insurance and benefits provider. It offers medical, pharmaceutical, dental, behavioral health, long-term care, and disability plans through affiliates like Anthem Blue Cross, Wellpoint, and Carelon710. Focused on “whole health,” the company addresses physical, behavioral, and social needs to improve overall health and well-being.
Elevance Health, Inc. (NYSE: ELV) posted solid financial fundamentals despite difficulties in Q3 2024. Adjusted diluted profits per share were $8.37, and total operating revenue was $44.7 billion, up 5% year over year. However, the company’s Medicaid division had high medical costs, which resulted in a lowered full-year 2024 outlook of about $33 adjusted diluted EPS. With high single-digit percentage increases and at least 12% annual growth in adjusted diluted EPS, the company anticipates robust revenue growth in 2025. With plans to buy Kroger Specialty Pharmacy, expand its individual and family ACA plans in Florida, Maryland, and Texas, and enter three more states with individual exchange products, the firm is pursuing strategic expansion.
Elevance Health, Inc. (NYSE:ELV) introduced its 2025 Medicare Advantage Plans on October 1st, providing over 40.3 million eligible consumers in 23 states with customizable benefits and flexible options. 2.9 million Medicare beneficiaries are now served by the company’s linked health plans, and by 2025, the corporation hopes to offer individualized care that goes beyond medical treatment.
Artisan Partners’ Artisan Select Equity Fund stated the following regarding Elevance Health, Inc. (NYSE:ELV) in its Q2 2024 investor letter:
“The top contributors to performance for the quarter were Alphabet, Lam Research, and Elevance Health, Inc. (NYSE:ELV). Elevance shares rose 5% during the quarter. The business has been performing well and has delivered good profit growth this year, despite a flat top line. It has largely navigated the challenges related to Medicaid redeterminations, which have caused temporary volatility in membership and healthcare utilization levels. Its vertical integration strategy is gaining traction, with strong revenue and profit growth at its Carelon Services business. Elevance’s shares are trading at 13X earnings, which is a very attractive investment proposition for a durable business that expects long-term earnings growth of over 12%.”
Overall ELV ranks 7th on our list of the cheap healthcare stocks to buy heading into 2025. While we acknowledge the potential of ELV as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than ELV but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
Shelley Larkin is a news writer for Canary Islands News. She writes about arts, construction, automotive, travel, real estate, and fashion. She is also interested in sports and movies.
Shelley enjoys spending time with her family and friends, listening to music and going to the movies.
