Is Anthem, Inc. (NYSE:ANTM) Potentially Undervalued?

Let's talk about the popular Anthem, Inc. (NYSE:ANTM). The company's shares saw a significant share price rise of over 20% in the past couple of months on the NYSE. As a large-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. But what if there is still an opportunity to buy? Today I will analyse the most recent data on Anthem’s outlook and valuation to see if the opportunity still exists.

Check out our latest analysis for Anthem

What's the opportunity in Anthem?

Great news for investors – Anthem is still trading at a fairly cheap price according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Anthem’s ratio of 15.08x is below its peer average of 23.08x, which indicates the stock is trading at a lower price compared to the Healthcare industry. Anthem’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. If you believe the share price should eventually reach its industry peers, a low beta could suggest it is unlikely to rapidly do so anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range.

What does the future of Anthem look like?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. With profit expected to grow by 47% over the next couple of years, the future seems bright for Anthem. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.

What this means for you:

Are you a shareholder? Since ANTM is currently below the industry PE ratio, it may be a great time to increase your holdings in the stock. With a positive outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as financial health to consider, which could explain the current price multiple.

Are you a potential investor? If you’ve been keeping an eye on ANTM for a while, now might be the time to enter the stock. Its buoyant future profit outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy ANTM. But before you make any investment decisions, consider other factors such as the track record of its management team, in order to make a well-informed investment decision.

Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Anthem. You can find everything you need to know about Anthem in the latest infographic research report. If you are no longer interested in Anthem, you can use our free platform to see my list of over 50 other stocks with a high growth potential.

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This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Thank you for reading.