Intrinsic value of Anthem - ANTM

Previous Close

$193.35

  Intrinsic Value

$302.45

stock screener

  Rating & Target

str. buy

+56%

  Value-price divergence*

-59%

Previous close

$193.35

 
Intrinsic value

$302.45

 
Up/down potential

+56%

 
Rating

str. buy

 
Value-price divergence*

-59%

Our model is not good at valuating stocks of financial companies, such as ANTM.

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of ANTM stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2016), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 51.1

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  7.24
  10.70
  10.13
  9.62
  9.16
  8.74
  8.37
  8.03
  7.73
  7.45
  7.21
  6.99
  6.79
  6.61
  6.45
  6.30
  6.17
  6.06
  5.95
  5.86
  5.77
  5.69
  5.62
  5.56
  5.51
  5.45
  5.41
  5.37
  5.33
  5.30
  5.27
Revenue, $m
  0
  94,071
  103,600
  113,563
  123,960
  134,794
  146,071
  157,799
  169,991
  182,662
  195,828
  209,512
  223,735
  238,524
  253,906
  269,912
  286,575
  303,931
  322,016
  340,872
  360,540
  381,066
  402,496
  424,880
  448,270
  472,722
  498,293
  525,042
  553,035
  582,336
  613,016
Variable operating expenses, $m
 
  87,580
  96,274
  105,364
  114,849
  124,733
  135,021
  145,722
  156,845
  168,405
  180,417
  191,145
  204,121
  217,613
  231,647
  246,250
  261,452
  277,286
  293,787
  310,989
  328,933
  347,660
  367,211
  387,633
  408,973
  431,281
  454,610
  479,014
  504,553
  531,285
  559,276
Fixed operating expenses, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total operating expenses, $m
  79,700
  87,580
  96,274
  105,364
  114,849
  124,733
  135,021
  145,722
  156,845
  168,405
  180,417
  191,145
  204,121
  217,613
  231,647
  246,250
  261,452
  277,286
  293,787
  310,989
  328,933
  347,660
  367,211
  387,633
  408,973
  431,281
  454,610
  479,014
  504,553
  531,285
  559,276
Operating income, $m
  5,278
  6,491
  7,326
  8,199
  9,111
  10,061
  11,049
  12,077
  13,146
  14,257
  15,411
  18,367
  19,614
  20,910
  22,259
  23,662
  25,123
  26,644
  28,230
  29,883
  31,607
  33,406
  35,285
  37,247
  39,298
  41,441
  43,683
  46,028
  48,482
  51,051
  53,740
EBITDA, $m
  6,190
  8,603
  9,475
  10,386
  11,337
  12,328
  13,359
  14,432
  15,547
  16,706
  17,910
  19,161
  20,462
  21,815
  23,222
  24,685
  26,209
  27,797
  29,451
  31,175
  32,974
  34,851
  36,811
  38,858
  40,998
  43,234
  45,572
  48,019
  50,579
  53,259
  56,065
Interest expense (income), $m
  595
  598
  759
  929
  1,107
  1,293
  1,486
  1,688
  1,897
  2,115
  2,342
  2,577
  2,821
  3,075
  3,340
  3,614
  3,900
  4,198
  4,508
  4,831
  5,168
  5,519
  5,886
  6,269
  6,669
  7,087
  7,524
  7,980
  8,458
  8,958
  9,482
Earnings before tax, $m
  4,555
  5,893
  6,567
  7,270
  8,004
  8,768
  9,563
  10,390
  11,249
  12,142
  13,070
  15,790
  16,793
  17,835
  18,919
  20,048
  21,222
  22,446
  23,722
  25,052
  26,439
  27,887
  29,399
  30,978
  32,629
  34,355
  36,159
  38,048
  40,024
  42,092
  44,258
Tax expense, $m
  2,085
  1,591
  1,773
  1,963
  2,161
  2,367
  2,582
  2,805
  3,037
  3,278
  3,529
  4,263
  4,534
  4,815
  5,108
  5,413
  5,730
  6,060
  6,405
  6,764
  7,138
  7,529
  7,938
  8,364
  8,810
  9,276
  9,763
  10,273
  10,806
  11,365
  11,950
Net income, $m
  2,470
  4,302
  4,794
  5,307
  5,843
  6,401
  6,981
  7,584
  8,212
  8,864
  9,541
  11,527
  12,259
  13,019
  13,811
  14,635
  15,492
  16,386
  17,317
  18,288
  19,300
  20,357
  21,461
  22,614
  23,819
  25,079
  26,396
  27,775
  29,217
  30,727
  32,309

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  65,083
  72,030
  79,326
  86,955
  94,916
  103,211
  111,846
  120,826
  130,162
  139,863
  149,945
  160,423
  171,313
  182,637
  194,415
  206,671
  219,430
  232,719
  246,567
  261,005
  276,065
  291,781
  308,190
  325,329
  343,239
  361,962
  381,541
  402,023
  423,457
  445,893
  469,385
Adjusted assets (=assets-cash), $m
  65,083
  72,030
  79,326
  86,955
  94,916
  103,211
  111,846
  120,826
  130,162
  139,863
  149,945
  160,423
  171,313
  182,637
  194,415
  206,671
  219,430
  232,719
  246,567
  261,005
  276,065
  291,781
  308,190
  325,329
  343,239
  361,962
  381,541
  402,023
  423,457
  445,893
  469,385
Revenue / Adjusted assets
  0.000
  1.306
  1.306
  1.306
  1.306
  1.306
  1.306
  1.306
  1.306
  1.306
  1.306
  1.306
  1.306
  1.306
  1.306
  1.306
  1.306
  1.306
  1.306
  1.306
  1.306
  1.306
  1.306
  1.306
  1.306
  1.306
  1.306
  1.306
  1.306
  1.306
  1.306
Average production assets, $m
  9,615
  10,630
  11,707
  12,833
  14,008
  15,232
  16,506
  17,831
  19,209
  20,641
  22,129
  23,675
  25,282
  26,953
  28,691
  30,500
  32,383
  34,344
  36,388
  38,519
  40,741
  43,060
  45,482
  48,011
  50,655
  53,418
  56,307
  59,330
  62,493
  65,804
  69,271
Working capital, $m
  0
  1,505
  1,658
  1,817
  1,983
  2,157
  2,337
  2,525
  2,720
  2,923
  3,133
  3,352
  3,580
  3,816
  4,062
  4,319
  4,585
  4,863
  5,152
  5,454
  5,769
  6,097
  6,440
  6,798
  7,172
  7,564
  7,973
  8,401
  8,849
  9,317
  9,808
Total debt, $m
  15,727
  19,970
  24,450
  29,134
  34,022
  39,116
  44,417
  49,931
  55,663
  61,620
  67,810
  74,243
  80,930
  87,883
  95,115
  102,640
  110,474
  118,633
  127,136
  136,001
  145,248
  154,897
  164,973
  175,496
  186,493
  197,989
  210,010
  222,586
  235,747
  249,522
  263,946
Total liabilities, $m
  39,983
  44,226
  48,706
  53,390
  58,278
  63,372
  68,673
  74,187
  79,919
  85,876
  92,066
  98,499
  105,186
  112,139
  119,371
  126,896
  134,730
  142,889
  151,392
  160,257
  169,504
  179,153
  189,229
  199,752
  210,749
  222,245
  234,266
  246,842
  260,003
  273,778
  288,202
Total equity, $m
  25,100
  27,803
  30,620
  33,565
  36,638
  39,840
  43,173
  46,639
  50,242
  53,987
  57,879
  61,923
  66,127
  70,498
  75,044
  79,775
  84,700
  89,829
  95,175
  100,748
  106,561
  112,627
  118,961
  125,577
  132,490
  139,717
  147,275
  155,181
  163,454
  172,115
  181,182
Total liabilities and equity, $m
  65,083
  72,029
  79,326
  86,955
  94,916
  103,212
  111,846
  120,826
  130,161
  139,863
  149,945
  160,422
  171,313
  182,637
  194,415
  206,671
  219,430
  232,718
  246,567
  261,005
  276,065
  291,780
  308,190
  325,329
  343,239
  361,962
  381,541
  402,023
  423,457
  445,893
  469,384
Debt-to-equity ratio
  0.627
  0.720
  0.800
  0.870
  0.930
  0.980
  1.030
  1.070
  1.110
  1.140
  1.170
  1.200
  1.220
  1.250
  1.270
  1.290
  1.300
  1.320
  1.340
  1.350
  1.360
  1.380
  1.390
  1.400
  1.410
  1.420
  1.430
  1.430
  1.440
  1.450
  1.460
Adjusted equity ratio
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  2,470
  4,302
  4,794
  5,307
  5,843
  6,401
  6,981
  7,584
  8,212
  8,864
  9,541
  11,527
  12,259
  13,019
  13,811
  14,635
  15,492
  16,386
  17,317
  18,288
  19,300
  20,357
  21,461
  22,614
  23,819
  25,079
  26,396
  27,775
  29,217
  30,727
  32,309
Depreciation, amort., depletion, $m
  912
  2,113
  2,149
  2,187
  2,226
  2,267
  2,310
  2,354
  2,401
  2,449
  2,499
  794
  848
  904
  963
  1,023
  1,087
  1,152
  1,221
  1,293
  1,367
  1,445
  1,526
  1,611
  1,700
  1,793
  1,889
  1,991
  2,097
  2,208
  2,325
Funds from operations, $m
  2,630
  6,415
  6,943
  7,494
  8,069
  8,668
  9,291
  9,939
  10,612
  11,312
  12,040
  12,321
  13,107
  13,924
  14,774
  15,658
  16,579
  17,538
  18,538
  19,580
  20,668
  21,802
  22,987
  24,225
  25,519
  26,871
  28,286
  29,766
  31,314
  32,936
  34,633
Change in working capital, $m
  -575
  145
  152
  159
  166
  173
  180
  188
  195
  203
  211
  219
  228
  237
  246
  256
  267
  278
  289
  302
  315
  328
  343
  358
  374
  391
  409
  428
  448
  469
  491
Cash from operations, $m
  3,205
  6,269
  6,791
  7,335
  7,903
  8,494
  9,110
  9,751
  10,417
  11,110
  11,829
  12,102
  12,879
  13,687
  14,528
  15,402
  16,312
  17,261
  18,248
  19,278
  20,353
  21,474
  22,645
  23,867
  25,145
  26,480
  27,877
  29,338
  30,866
  32,467
  34,142
Maintenance CAPEX, $m
  0
  -323
  -357
  -393
  -431
  -470
  -511
  -554
  -598
  -645
  -693
  -743
  -794
  -848
  -904
  -963
  -1,023
  -1,087
  -1,152
  -1,221
  -1,293
  -1,367
  -1,445
  -1,526
  -1,611
  -1,700
  -1,793
  -1,889
  -1,991
  -2,097
  -2,208
New CAPEX, $m
  -584
  -1,015
  -1,077
  -1,126
  -1,175
  -1,224
  -1,274
  -1,325
  -1,378
  -1,432
  -1,488
  -1,546
  -1,607
  -1,671
  -1,738
  -1,809
  -1,883
  -1,961
  -2,044
  -2,131
  -2,223
  -2,319
  -2,422
  -2,529
  -2,643
  -2,763
  -2,889
  -3,023
  -3,163
  -3,311
  -3,467
Cash from investing activities, $m
  -514
  -1,338
  -1,434
  -1,519
  -1,606
  -1,694
  -1,785
  -1,879
  -1,976
  -2,077
  -2,181
  -2,289
  -2,401
  -2,519
  -2,642
  -2,772
  -2,906
  -3,048
  -3,196
  -3,352
  -3,516
  -3,686
  -3,867
  -4,055
  -4,254
  -4,463
  -4,682
  -4,912
  -5,154
  -5,408
  -5,675
Free cash flow, $m
  2,691
  4,931
  5,357
  5,816
  6,297
  6,800
  7,325
  7,872
  8,441
  9,033
  9,648
  9,814
  10,478
  11,168
  11,885
  12,631
  13,406
  14,213
  15,052
  15,927
  16,838
  17,787
  18,778
  19,811
  20,890
  22,017
  23,195
  24,425
  25,712
  27,059
  28,467
Issuance/(repayment) of debt, $m
  0
  4,243
  4,480
  4,684
  4,888
  5,093
  5,302
  5,514
  5,732
  5,957
  6,190
  6,433
  6,687
  6,953
  7,232
  7,525
  7,834
  8,160
  8,503
  8,865
  9,247
  9,650
  10,075
  10,524
  10,997
  11,496
  12,022
  12,576
  13,160
  13,776
  14,424
Issuance/(repurchase) of shares, $m
  119
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  -49
  4,243
  4,480
  4,684
  4,888
  5,093
  5,302
  5,514
  5,732
  5,957
  6,190
  6,433
  6,687
  6,953
  7,232
  7,525
  7,834
  8,160
  8,503
  8,865
  9,247
  9,650
  10,075
  10,524
  10,997
  11,496
  12,022
  12,576
  13,160
  13,776
  14,424
Total cash flow (excl. dividends), $m
  2,646
  9,174
  9,837
  10,500
  11,185
  11,894
  12,627
  13,386
  14,173
  14,990
  15,839
  16,247
  17,165
  18,120
  19,117
  20,156
  21,240
  22,372
  23,555
  24,792
  26,085
  27,437
  28,853
  30,335
  31,887
  33,513
  35,216
  37,002
  38,873
  40,834
  42,891
Retained Cash Flow (-), $m
  -2,056
  -2,703
  -2,816
  -2,945
  -3,073
  -3,202
  -3,333
  -3,466
  -3,603
  -3,745
  -3,892
  -4,044
  -4,204
  -4,371
  -4,546
  -4,731
  -4,925
  -5,130
  -5,345
  -5,573
  -5,813
  -6,067
  -6,334
  -6,616
  -6,913
  -7,227
  -7,558
  -7,906
  -8,273
  -8,660
  -9,068
Prev. year cash balance distribution, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  6,471
  7,021
  7,555
  8,112
  8,691
  9,294
  9,920
  10,570
  11,245
  11,947
  12,202
  12,961
  13,750
  14,570
  15,425
  16,315
  17,243
  18,210
  19,219
  20,271
  21,371
  22,519
  23,719
  24,974
  26,286
  27,659
  29,095
  30,599
  32,174
  33,823
Discount rate, %
 
  6.80
  7.14
  7.50
  7.87
  8.27
  8.68
  9.11
  9.57
  10.05
  10.55
  11.08
  11.63
  12.21
  12.82
  13.46
  14.14
  14.84
  15.59
  16.37
  17.18
  18.04
  18.94
  19.89
  20.89
  21.93
  23.03
  24.18
  25.39
  26.66
  27.99
PV of cash for distribution, $m
 
  6,059
  6,116
  6,082
  5,991
  5,843
  5,641
  5,387
  5,088
  4,751
  4,382
  3,842
  3,461
  3,075
  2,691
  2,319
  1,967
  1,640
  1,343
  1,079
  850
  656
  495
  366
  263
  185
  126
  84
  54
  34
  21
Current shareholders' claim on cash, %
  100
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

Anthem, Inc., through its subsidiaries, operates as a health benefits company in the United States. It operates through three segments: Commercial and Specialty Business, Government Business, and Other. The company offers a spectrum of network-based managed care health benefit plans to large and small employer, individual, Medicaid, and Medicare markets. Its managed care plans include preferred provider organizations; health maintenance organizations; point-of-service plans; traditional indemnity plans and other hybrid plans, such as consumer-driven health plans; and hospital only and limited benefit products. The company also provides a range of managed care services to self-funded customers, including claims processing, underwriting, stop loss insurance, actuarial services, provider network access, medical cost management, disease management, wellness programs, and other administrative services. In addition, it offers an array of specialty and other insurance products and services, such as dental, vision, life and disability insurance benefits, radiology benefit management, and analytics-driven personal health care guidance; and Medicare administrative services. Further, the company provides services to the federal government in connection with the Federal Employee Program; and operates as a licensee of the Blue Cross and Blue Shield Association. As of December 31, 2016, it served 39.9 million medical members through its affiliated health plans. The company was formerly known as WellPoint, Inc. and changed its name to Anthem, Inc. in December 2014. Anthem, Inc. was founded in 1944 and is headquartered in Indianapolis, Indiana.

FINANCIAL RATIOS  of  Anthem (ANTM)

Valuation Ratios
P/E Ratio 20.6
Price to Sales 0.6
Price to Book 2
Price to Tangible Book
Price to Cash Flow 15.9
Price to Free Cash Flow 19.5
Growth Rates
Sales Growth Rate 7.2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -8.5%
Cap. Spend. - 3 Yr. Gr. Rate -2%
Financial Strength
Quick Ratio 0
Current Ratio NaN
LT Debt to Equity 57.2%
Total Debt to Equity 62.7%
Interest Coverage 9
Management Effectiveness
Return On Assets 4.4%
Ret/ On Assets - 3 Yr. Avg. 4.6%
Return On Total Capital 6.2%
Ret/ On T. Cap. - 3 Yr. Avg. 6.4%
Return On Equity 10.3%
Return On Equity - 3 Yr. Avg. 10.5%
Asset Turnover 1.3
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 0%
EBITDA Margin 7.1%
EBITDA Margin - 3 Yr. Avg. 7.6%
Operating Margin 6.2%
Oper. Margin - 3 Yr. Avg. 6.5%
Pre-Tax Margin 5.4%
Pre-Tax Margin - 3 Yr. Avg. 5.7%
Net Profit Margin 2.9%
Net Profit Margin - 3 Yr. Avg. 3.2%
Effective Tax Rate 45.8%
Eff/ Tax Rate - 3 Yr. Avg. 44%
Payout Ratio 27.7%

ANTM stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the ANTM stock intrinsic value calculation we used $84978 million for the last fiscal year's total revenue generated by Anthem. The default revenue input number comes from 2016 income statement of Anthem. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our ANTM stock valuation model: a) initial revenue growth rate of 10.7% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 6.8%, whose default value for ANTM is calculated based on our internal credit rating of Anthem, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Anthem.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of ANTM stock the variable cost ratio is equal to 93.3%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for ANTM stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 3.8% for Anthem.

Corporate tax rate of 27% is the nominal tax rate for Anthem. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the ANTM stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for ANTM are equal to 11.3%.

Life of production assets of 29.8 years is the average useful life of capital assets used in Anthem operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for ANTM is equal to 1.6%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $25100 million for Anthem - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 264.239 million for Anthem is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Anthem at the current share price and the inputted number of shares is $51.1 billion.

RELATED COMPANIES Price Int.Val. Rating
UNH UnitedHealth G 193.77 203.69  hold
HUM Humana 247.36 152.36  sell
AET Aetna 155.90 111.06  sell
CI Cigna 179.86 235.86  buy
MOH Molina Healthc 56.78 356.65  str.buy
CNC Centene 82.87 1,096.19  str.buy
WCG WellCare Healt 174.64 1,154.00  str.buy
CSLT Castlight Heal 3.90 0.62  str.sell

COMPANY NEWS

▶ [$$] Nevada Counties Gain ACA Exchange Plans   [Aug-15-17 05:53PM  The Wall Street Journal]
▶ Healthcare Management Stocks Look Too Pricey for Activists   [Aug-14-17 04:11PM  TheStreet.com]
▶ ETFs with exposure to Anthem, Inc. : August 8, 2017   [Aug-08-17 03:55PM  Capital Cube]
▶ Aetna trumps 2Q expectations after scaling back ACA coverage   [Aug-03-17 11:04AM  Associated Press]
▶ What's working: Health insurer stocks   [07:16AM  CNBC Videos]
▶ Molina Healthcare to exit ACA exchanges in Utah, Wisconsin   [Aug-02-17 06:54PM  Associated Press]
▶ Some Insurers Seek ACA Premium Increases of 30% and Higher   [12:09AM  The Wall Street Journal]
▶ Company News for July 27, 2017   [10:44AM  Zacks]
▶ [$$] Anthem Seeks Clarity from Health Law Debate   [01:11AM  The Wall Street Journal]
▶ Anthem beats 2Q profit forecasts   [Jul-26-17 09:54PM  Associated Press]
▶ [$$] Anthem Seeks Clarity from Health Law Debate   [11:55AM  The Wall Street Journal]
▶ Anthem Reports Second Quarter 2017 Results   [06:00AM  Business Wire]
▶ Health Carrier Stocks Need to Hold These Levels   [Jul-19-17 11:39AM  Investopedia]
▶ [$$] Barron's First-Half Grades for Stock-Picking Are In   [Jul-15-17 12:38AM  Barrons.com]
▶ [$$] States to Health Insurers: Please Come Back   [12:36AM  The Wall Street Journal]
▶ [$$] States to Health Insurers: Please Come Back   [Jul-14-17 07:16PM  The Wall Street Journal]
▶ [$$] Anthem Files Civil Suit Against Insys Therapeutics   [12:34AM  The Wall Street Journal]
▶ Anthem files lawsuit against Insys Therapeutics   [Jul-13-17 07:21PM  Reuters]
▶ [$$] Anthem Files Civil Suit Against Insys Therapeutics   [06:39PM  The Wall Street Journal]
▶ [$$] Anthem's New Chapter After Cigna   [11:17AM  Barrons.com]
▶ Watching for Buying Signals Near Trendline Support   [Jul-12-17 01:00PM  Investopedia]
▶ [$$] What Anthem's Settlement Reveals About Future Data Breach Suits   [Jul-03-17 07:10AM  The Wall Street Journal]
▶ [$$] Centene to Offer ACA Exchange Plans in 40 Missouri Counties in 2018   [Jun-30-17 07:31PM  The Wall Street Journal]
▶ [$$] Anthem Pulling Back on Offering ACA Plans in Nevada   [Jun-28-17 08:46PM  The Wall Street Journal]
▶ Which Industry Spends the Most on Lobbying?   [Jun-27-17 01:15PM  Investopedia]
▶ The Latest: 3 GOP senators threaten to oppose health bill   [Jun-26-17 07:20PM  Associated Press]
▶ Anthem to pay $115 million in data breach settlement   [09:05AM  American City Business Journals]
Stock chart of ANTM Financial statements of ANTM
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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