Anthem (ANTM) is a U.S. managed care company, which provides excellent shareholder value. The stock is a strong buy.

Robust Growth

Anthem has improved on its operating income lately by increasing its 3-year operating income’s CAGR to 10.31% from its 10-year CAGR of 4.50%. The company recently beat its Q-2 earnings estimates after posting quarterly operating revenue of $33.3B, a 14.1% year-over-year increase.

Q-2 success was driven largely by higher premium revenues, which were linked to Medicare and Medicaid growth. In addition, the revenue from Anthem’s pharmacy benefit manager IngenioRx rose by 18%, while its government business also increased by 16.4% year-over-year.

Anthem is confident in its guidance regarding memberships. For the full year 2021, Anthem anticipates that there will be 44.8 to 45.3 million members and a revenue of $135.2 billion for full-year.

Value In-Store

Anthem’s share buyback activity was resumed last June. In the first half of 2021, the company repurchased stock worth $927 million, and it’s expected to buy back a total of 1.6 billion for the entirety of 2021.

It’s forecasted that Anthem’s diluted EPS will grow by 13.62% for the year ahead. The diluted EPS measurement is excellent for investors as it measures profitability relative to shares outstanding. It is basically what you have left as an equity holder. This ratio is also a good indicator of future stock prices. If Anthem achieves its target diluted earnings per share, then the stock will most likely rise.

Price/sales (0.74), which is at -90.60% of the industry average, could be used to support the value argument. You could also consider the stock’s value/earnings (18.56), -20.22% less than the industry-average.

Key Drivers

Anthem’s considerable value-add has been its ability to strike partnerships and complete accretive acquisitions, which has resulted in a significant amount of synergies.

Anthem has increased its market share by buying out Beacon Health, myNexus and expanding its reach through the leveraging of behavioral and nursing businesses. The pharmacy industry has seen a significant increase in topline growth by CVS (CVS).

Wall Street’s Take

Wall Street rates Anthem highly and the general consensus is that it’s a Strong Buy. The 14 analysts have given Anthem 11 Buy ratings, three Hold ratings, and none Sell ratings. Anthem has an average target price of $429.43. This could give investors more than 11% gain.

Final Word

Anthem is an outstanding stock and will provide value to shareholders at this stage, due to its market positioning and stock buyback program. Wall Street considers Anthem a good stock for capital gains or dividend investors. This is something I completely agree with.

Disclosure: Steve Gray Booyens held a long position in CVS at the time this article was published.

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