Stock Analysis | Elevance Health Outlook - A Stock at a Crossroads in the Health Care Sector

Market Snapshot

Takeaway: Elevance Health (ELV) is showing an upward price trend of 2.80%, but our internal diagnostic score for the technical indicators is only 3.32, suggesting a weak chart setup and a recommendation to avoid the stock.

News Highlights

• Healthcare Mergers and Legal Actions: Recent news highlighted UnitedHealth Group and Amedisys agreeing to a proposed final judgment to resolve antitrust concerns. These kinds of regulatory actions can affect market sentiment across the health care sector and indirectly impact stocks like ELV.
• Novo Nordisk Earnings Drag on Sector: Health care stocks, including ELV, were under pressure as Novo Nordisk's shares declined despite a strong sales report for Wegovy. Concerns about generic competition are affecting investor confidence in the sector.
• CVS Expands Primary Care Offerings: CVS is expanding primary care services in Massachusetts through MinuteClinic partnerships. While this development primarily affects its direct rivals, it reflects broader trends in the health care sector toward accessibility, which could influence ELV’s strategic positioning over time.

Analyst Views & Fundamentals

Elevance Health is facing a mixed outlook from analysts and fundamentals. The simple average rating score is 4.08, while the performance-weighted rating score is 2.35. This divergence indicates a low consensus and a high dispersion in analyst views, with some firms having poor historical performance, such as Truist Securities and Wells Fargo.

Despite a current price increase of 2.80%, the market’s expectation is relatively neutral when adjusted for historical performance. This mismatch between price trend and analyst sentiment is a cause for caution.

Key Fundamental Values and Internal Diagnostic Scores

• Revenue-to-Market Value (Revenue-MV): 1.97 (internal diagnostic score: 3). This suggests a moderate alignment between revenue and market value.
• Price-to-Sales (PS): 2.06 (internal diagnostic score: 2). A reasonable PS ratio but not particularly strong.
• Asset-to-Market Value (Asset-MV): -0.06 (internal diagnostic score: 3). Assets appear undervalued relative to market cap.
• Operating Cash Flow per Share (YoY growth rate): 30.62% (internal diagnostic score: 1). This is positive but not reflected in the stock's technical strength.
• Cash-UP: 1.19 (internal diagnostic score: 3). Cash flow utilization appears moderate.
• Net Profit Attributable to Parent (YoY growth rate): -13.64% (internal diagnostic score: 1). A negative profit growth rate is a red flag.
• Cash-to-Market Value (Cash-MV): 0.72 (internal diagnostic score: 0). This is the lowest-scoring fundamental factor and suggests weak cash value relative to market price.

Money-Flow Trends

Big-money trends in Elevance Health are currently negative, with large, extra-large, and block investors all showing outflows. The overall inflow ratio is 0.48, indicating a modest outflow, while the fund-flow score of 7.82 is rated as "good." This suggests that while big investors are pulling back, it's not an extreme outflow event. Retail and mid-sized flows are also trending downward, reinforcing the bearish sentiment on the stock.

Key Technical Signals

The technical picture for Elevance Health is weak, with an internal diagnostic score of 3.32 and a recommendation to avoid the stock. Here's a breakdown of the key technical signals:

• Williams %R Oversold: This indicator has appeared multiple times in the past five trading days and has an internal diagnostic score of 1.02, suggesting it's a weak bearish signal.
• MACD Golden Cross: This is another bearish signal with an internal diagnostic score of 1.00, indicating it's not supporting a bullish case.
• Inverted Hammer: This is a rare positive indicator, appearing on August 5 with an internal diagnostic score of 7.94. It's a strong bullish signal but has not been enough to offset the bearish momentum.

The key technical insights from the model indicate a weak trend and mixed momentum. While there is a bullish candlestick pattern (Inverted Hammer) in recent data, the overall trend is bearish, and the market remains in a consolidating phase with no clear direction.

Conclusion

Elevance Health is at a crossroads. While the fundamentals and recent earnings show some mixed signs, the technical indicators are weak, and institutional sentiment is divided. With a fund-flow score of 7.82 and a technical score of 3.32, the stock is currently under pressure from both market and technical angles.

Actionable takeaway: Consider waiting for a clearer breakout or a pull-back in the coming weeks before considering a position in ELV. Monitor the upcoming analyst updates and any regulatory developments in the health care sector, which could provide more clarity on the stock's path forward.