Elevance Health Inc.ELVNYSE

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DCF Valuation

⚠️Model Warnings

•Terminal value represents 87% of enterprise value. Valuation highly sensitive to long-term assumptions.

DCF Valuation Summary

Strong Buy

Fair Value: $3,141.78 per share(market-calibrated)

+1006.1%

Upside to Fair Value

Current

$284.03

Pure Model

$3,631.55

Fair Value

$3,141.78

Bull Case

$4,383.53

Bear Case

$3,034.80

Market Reality Check

Model Terminal Growth

3.00%

Market-Implied Growth

0.50%

Calibrated Growth

2.13%

Fair value uses 65% model / 35% market-implied terminal growth. Pure model: $3,631.55.

What's Driving This Ratingfor ELV

✓

CapEx already efficient

CapEx at 0.59% of revenue is already at or below sector maintenance level. No normalization needed — cash conversion is already strong.

↑

Margin expansion modeled

Current EBIT margin is 5.20% — below the sector mature average of 20.00%. Model expands margins as the business scales and operating leverage kicks in. Year 10 EBIT reaches $40.6B (15.15% margin).

→

Moderate revenue growth

Analyst consensus projects -2.11% revenue growth, fading to 3.00% by Year 10. Revenue reaches $267.8B (vs $199.1B today).

🎯

Market pricing in lower growth than model

The market implies only 0.50% perpetual growth — 250bps below the model's 3.00%. This suggests the market sees headwinds or risks not in the model.

✓

Strong cash flow conversion

Year 10 FCF/EBITDA conversion of 79.57% indicates efficient cash generation. FCF reaches $33.9B by Year 10 (12.67% FCF margin).

Weighted Average Cost of Capital (WACC)

Cost of Equity (CAPM)

Risk-Free Rate (Rf)4.50%

Beta (β)0.47

Market Risk Premium4.50%

*Using current implied premium (4.5% per Damodaran 2026), not historical (6.5%)

Cost of Equity (Re)6.61%

Cost of Debt

Pre-tax Cost of Debt3.17%

Tax Rate15.63%

After-tax Cost of Debt2.67%

Equity Weight (E/V)65.46%

Debt Weight (D/V)34.54%

WACC Calculation

WACC = (E/V × Re) + (D/V × Rd × (1-Tc))

WACC = (65.46% × 6.61%) + (34.54% × 2.67%)

= 5.50%

10-Year Free Cash Flow Projections(showing years 1, 3, 5, 7, 10)

Year	Year 1	Year 3	Year 5	Year 7	Year 10
Revenue	$194.9B	$209.4B	$231.3B	$245.1B	$267.8B
EBIT	$10.1B	$10.9B	$12.0B	$25.8B	$40.6B
Tax	$1.6B	$1.7B	$1.9B	$4.0B	$6.3B
NOPAT	$8.6B	$9.2B	$10.1B	$21.8B	$34.2B
+ Depreciation	$1.5B	$1.6B	$1.8B	$1.9B	$2.1B
- Capex	$1.2B	$1.2B	$1.4B	$1.5B	$1.6B
- Δ NWC	-$419M	$882M	$660M	$705M	$780M
Free Cash Flow	$9.3B	$8.7B	$9.9B	$21.5B	$33.9B
Discount Factor	0.948	0.852	0.765	0.687	0.585
Present Value	$8.8B	$7.4B	$7.6B	$14.8B	$19.9B

FCF Formula: Free Cash Flow = NOPAT + Depreciation - Capex - Change in Net Working Capital

Terminal Value Calculation

Perpetuity Growth Method

Year 10 FCF$33.9B

Terminal Growth Rate3.00%

WACC5.50%

TV = FCF₁₀ × (1+g) / (WACC-g)

Terminal Value$1.4T

PV of Terminal Value$818.2B

Exit Multiple Method

Year 10 EBITDA$42.6B

Exit Multiple (EV/EBITDA)24.0x

TV = EBITDA₁₀ × Exit Multiple

Terminal Value$1.0T

PV of Terminal Value$599.0B

Valuation Summary

Perpetuity Growth Method

PV of Projected FCFs$120.6B

PV of Terminal Value$818.2B

Enterprise Value$938.8B

(-) Net Debt$23.7B

Equity Value$915.1B

Shares Outstanding222M

Price per Share$4,125.60

Exit Multiple Method

PV of Projected FCFs$120.6B

PV of Terminal Value$599.0B

Enterprise Value$719.6B

(-) Net Debt$23.7B

Equity Value$695.9B

Shares Outstanding222M

Price per Share$3,137.49

Pure Model Fair Value

$3,631.55

Average of perpetuity growth and exit multiple methods (before market calibration)

Sensitivity AnalysisPrice per Share

WACC ↓ / Growth →	2.00%	2.50%	3.00%	3.50%	4.00%
3.50%	$4,683.58	$4,480.80	$4,287.72	$4,103.83	$3,928.64
4.50%	$3,966.26	$4,480.80	$4,287.72	$4,103.83	$3,928.64
5.50%	$3,091.80	$3,316.69	$3,631.55	$4,103.83	$3,928.64
6.50%	$2,556.60	$2,677.11	$2,832.05	$3,038.64	$3,327.86
7.50%	$2,181.85	$2,254.37	$2,343.00	$2,453.79	$2,596.23

How to read: This table shows how the valuation changes with different WACC (discount rate) and terminal growth rate assumptions. Green = undervalued, Red = overvalued.

Scenario Analysis

Bear Case

$3,034.80

968.5% vs current

• -25% vs analyst consensus
• Terminal growth: 2.5%
• Beta: 0.59

Base Case

$3,631.55

1178.6% vs current

• Analyst consensus
• Terminal growth: 3.0%
• Beta: 0.47

Bull Case

$4,383.53

1443.3% vs current

• +25% vs analyst consensus
• Terminal growth: 3.5%
• Beta: 0.40

Key Assumptions & Drivers✓ Using Analyst Consensus Estimates• Healthcare Sector

Growth Assumptions (Select Years)

Year 1 Revenue Growth-2.11%

Year 3 Revenue Growth4.40%

Year 5 Revenue Growth2.94%

Year 7 Revenue Growth2.96%

Year 10 Revenue Growth3.00%

Terminal Growth Rate3.00%

Margin & Efficiency

Current EBIT Margin5.20%

Terminal EBIT Margin20.00%

Tax Rate15.63%

Historical Capex / Rev0.59%

NWC / Revenue10.00%

Key Drivers: Revenue growth, operating margin expansion, capex efficiency, and working capital management are the primary drivers of cash flow generation. Terminal value assumptions significantly impact final valuation.

Institutional-Grade Methodology

Actual Company Data: Revenue, EBIT, Capex, NWC, Tax Rate, Interest Expense, Beta

Market Assumptions: Risk-free: 4.5% (10Y), MRP: 4.5% (Damodaran 2026), Exit: 24x EV/EBITDA (Healthcare sector)

This DCF model is for informational purposes only. Projections are based on assumptions that may not materialize. Past performance does not guarantee future results. Consult a financial advisor before making investment decisions.

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