Elevance Health, Inc. (ELV): A Cheap Healthcare Stock to Buy Heading Into 2025

Healthcare stocks have had a challenging year, but analysts and investors are optimistic about 2025, and the sector has shown signs of recovery in recent months. For investors looking to capitalize on the healthcare sector's potential, the challenge is to find stocks that have underperformed but still have room to grow. In this article, we'll focus on Elevance Health, Inc. (ELV), a leading U.S. health insurance and benefits provider that has seen a significant stock decline but remains a compelling investment opportunity.

Elevance Health, Inc. (NYSE:ELV) has a market capitalization of $86.06 billion and a P/E ratio of 13.51, making it an attractive option for investors seeking value in the healthcare sector. The company operates through four segments: Health Benefits, CarelonRx, Carelon Services, and Corporate & Other. It offers a variety of health plans and services, fee-based administrative managed care services, and specialty and other insurance products and services.

Elevance Health's vertical integration strategy has contributed to its financial performance and growth. The company's Carelon Services business has shown strong revenue and profit growth, driven by the company's solid performance and profit growth despite a flat top line. Artisan Partners' Artisan Select Equity Fund highlighted this in their Q2 2024 investor letter, stating that Elevance Health's shares rose 5% during the quarter.

Elevance Health's expansion plans, such as the acquisition of Kroger Specialty Pharmacy and entry into new states, play a significant role in its growth prospects. These strategic moves aim to broaden the company's service offerings and increase its market share, thereby driving revenue growth and stabilizing earnings. By successfully executing these plans, Elevance Health can drive revenue growth, stabilize earnings, and create long-term value for shareholders.

Elevance Health's focus on "whole health" and addressing physical, behavioral, and social needs has positively impacted its financial performance and growth. This approach allows the company to improve overall health and well-being, which can lead to better outcomes and lower costs. Elevance Health's revenue has grown at a steady pace over the past decade, with a compound annual growth rate (CAGR) of 9.1%, and its earnings per share (EPS) have grown significantly, with a CAGR of 13.7%.

Elevance Health's vertical integration strategy enhances its competitive position in the healthcare market by offering a wide range of services and capabilities. These services include pharmacy services, healthcare-related services and capabilities, data management, information technology, and business operations, as well as the National Government Services business. By providing these diverse services and capabilities, Elevance Health can better manage its members' healthcare needs, reduce costs, and improve overall satisfaction, ultimately driving revenue and profit growth.

In conclusion, Elevance Health, Inc. (ELV) is a cheap healthcare stock with significant growth potential heading into 2025. The company's vertical integration strategy, expansion plans, and focus on "whole health" have contributed to its financial performance and growth. With a market capitalization of $86.06 billion and a P/E ratio of 13.51, Elevance Health is an attractive investment opportunity for those seeking value in the healthcare sector. As the company continues to execute its strategic plans and drive growth, investors can expect strong returns in the coming years.