Intrinsic value of Anthem - ANTM

Previous Close

$194.69

  Intrinsic Value

$225.54

stock screener

  Rating & Target

hold

+16%

Previous close

$194.69

 
Intrinsic value

$225.54

 
Up/down potential

+16%

 
Rating

hold

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
  4.30
  4.37
  4.43
  4.49
  4.54
  4.59
  4.63
  4.67
  4.70
  4.73
  4.76
  4.78
  4.80
  4.82
  4.84
  4.86
  4.87
  4.88
  4.89
  4.91
  4.91
  4.92
  4.93
  4.94
  4.94
  4.95
  4.95
  4.96
  4.96
  4.97
Revenue, $m
  0
  88,632
  92,505
  96,606
  100,943
  105,527
  110,367
  115,475
  120,862
  126,541
  132,525
  138,828
  145,464
  152,450
  159,801
  167,535
  175,670
  184,226
  193,222
  202,680
  212,623
  223,073
  234,056
  245,597
  257,724
  270,467
  283,854
  297,918
  312,693
  328,213
  344,516
Variable operating expenses, $m
 
  82,618
  86,152
  89,893
  93,850
  98,032
  102,448
  107,108
  112,023
  117,204
  122,663
  126,657
  132,712
  139,085
  145,792
  152,848
  160,270
  168,076
  176,283
  184,912
  193,983
  203,517
  213,537
  224,067
  235,131
  246,756
  258,970
  271,801
  285,281
  299,440
  314,314
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
  82,618
  86,152
  89,893
  93,850
  98,032
  102,448
  107,108
  112,023
  117,204
  122,663
  126,657
  132,712
  139,085
  145,792
  152,848
  160,270
  168,076
  176,283
  184,912
  193,983
  203,517
  213,537
  224,067
  235,131
  246,756
  258,970
  271,801
  285,281
  299,440
  314,314
Operating income, $m
  5,278
  6,014
  6,353
  6,713
  7,093
  7,495
  7,919
  8,367
  8,839
  9,337
  9,862
  12,170
  12,752
  13,365
  14,009
  14,687
  15,400
  16,150
  16,939
  17,768
  18,640
  19,556
  20,519
  21,530
  22,594
  23,711
  24,884
  26,117
  27,412
  28,773
  30,202
EBITDA, $m
  6,190
  8,106
  8,460
  8,835
  9,232
  9,651
  10,094
  10,561
  11,054
  11,573
  12,120
  12,697
  13,304
  13,943
  14,615
  15,322
  16,066
  16,849
  17,672
  18,537
  19,446
  20,402
  21,406
  22,462
  23,571
  24,736
  25,961
  27,247
  28,598
  30,017
  31,508
Interest expense (income), $m
  595
  598
  662
  731
  804
  882
  964
  1,050
  1,141
  1,237
  1,339
  1,446
  1,558
  1,677
  1,802
  1,933
  2,071
  2,217
  2,370
  2,530
  2,699
  2,877
  3,064
  3,260
  3,466
  3,683
  3,910
  4,149
  4,401
  4,665
  4,942
Earnings before tax, $m
  4,555
  5,416
  5,692
  5,982
  6,289
  6,613
  6,956
  7,317
  7,698
  8,100
  8,523
  10,725
  11,194
  11,688
  12,207
  12,754
  13,329
  13,934
  14,569
  15,238
  15,940
  16,679
  17,455
  18,271
  19,128
  20,028
  20,974
  21,968
  23,012
  24,108
  25,260
Tax expense, $m
  2,085
  1,462
  1,537
  1,615
  1,698
  1,786
  1,878
  1,976
  2,078
  2,187
  2,301
  2,896
  3,022
  3,156
  3,296
  3,444
  3,599
  3,762
  3,934
  4,114
  4,304
  4,503
  4,713
  4,933
  5,164
  5,408
  5,663
  5,931
  6,213
  6,509
  6,820
Net income, $m
  2,470
  3,954
  4,155
  4,367
  4,591
  4,828
  5,078
  5,341
  5,620
  5,913
  6,222
  7,829
  8,171
  8,532
  8,911
  9,310
  9,730
  10,172
  10,636
  11,124
  11,637
  12,176
  12,742
  13,338
  13,963
  14,620
  15,311
  16,036
  16,799
  17,599
  18,440

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
  67,865
  70,831
  73,971
  77,292
  80,802
  84,508
  88,419
  92,544
  96,892
  101,474
  106,300
  111,381
  116,730
  122,359
  128,281
  134,510
  141,061
  147,950
  155,192
  162,804
  170,806
  179,216
  188,053
  197,339
  207,096
  217,346
  228,115
  239,428
  251,312
  263,795
Adjusted assets (=assets-cash), $m
  65,083
  67,865
  70,831
  73,971
  77,292
  80,802
  84,508
  88,419
  92,544
  96,892
  101,474
  106,300
  111,381
  116,730
  122,359
  128,281
  134,510
  141,061
  147,950
  155,192
  162,804
  170,806
  179,216
  188,053
  197,339
  207,096
  217,346
  228,115
  239,428
  251,312
  263,795
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
  10,015
  10,453
  10,916
  11,407
  11,925
  12,471
  13,049
  13,657
  14,299
  14,975
  15,688
  16,437
  17,227
  18,057
  18,931
  19,851
  20,818
  21,834
  22,903
  24,026
  25,207
  26,448
  27,752
  29,123
  30,563
  32,076
  33,665
  35,334
  37,088
  38,930
Working capital, $m
  0
  1,418
  1,480
  1,546
  1,615
  1,688
  1,766
  1,848
  1,934
  2,025
  2,120
  2,221
  2,327
  2,439
  2,557
  2,681
  2,811
  2,948
  3,092
  3,243
  3,402
  3,569
  3,745
  3,930
  4,124
  4,327
  4,542
  4,767
  5,003
  5,251
  5,512
Total debt, $m
  15,727
  17,413
  19,234
  21,162
  23,201
  25,356
  27,632
  30,033
  32,566
  35,236
  38,049
  41,012
  44,132
  47,416
  50,872
  54,509
  58,333
  62,356
  66,585
  71,032
  75,706
  80,619
  85,782
  91,208
  96,910
  102,901
  109,195
  115,807
  122,753
  130,049
  137,714
Total liabilities, $m
  39,983
  41,669
  43,490
  45,418
  47,457
  49,612
  51,888
  54,289
  56,822
  59,492
  62,305
  65,268
  68,388
  71,672
  75,128
  78,765
  82,589
  86,612
  90,841
  95,288
  99,962
  104,875
  110,038
  115,464
  121,166
  127,157
  133,451
  140,063
  147,009
  154,305
  161,970
Total equity, $m
  25,100
  26,196
  27,341
  28,553
  29,835
  31,189
  32,620
  34,130
  35,722
  37,400
  39,169
  41,032
  42,993
  45,058
  47,231
  49,516
  51,921
  54,450
  57,109
  59,904
  62,842
  65,931
  69,177
  72,588
  76,173
  79,939
  83,896
  88,052
  92,419
  97,006
  101,825
Total liabilities and equity, $m
  65,083
  67,865
  70,831
  73,971
  77,292
  80,801
  84,508
  88,419
  92,544
  96,892
  101,474
  106,300
  111,381
  116,730
  122,359
  128,281
  134,510
  141,062
  147,950
  155,192
  162,804
  170,806
  179,215
  188,052
  197,339
  207,096
  217,347
  228,115
  239,428
  251,311
  263,795
Debt-to-equity ratio
  0.627
  0.660
  0.700
  0.740
  0.780
  0.810
  0.850
  0.880
  0.910
  0.940
  0.970
  1.000
  1.030
  1.050
  1.080
  1.100
  1.120
  1.150
  1.170
  1.190
  1.200
  1.220
  1.240
  1.260
  1.270
  1.290
  1.300
  1.320
  1.330
  1.340
  1.350
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
  3,954
  4,155
  4,367
  4,591
  4,828
  5,078
  5,341
  5,620
  5,913
  6,222
  7,829
  8,171
  8,532
  8,911
  9,310
  9,730
  10,172
  10,636
  11,124
  11,637
  12,176
  12,742
  13,338
  13,963
  14,620
  15,311
  16,036
  16,799
  17,599
  18,440
Depreciation, amort., depletion, $m
  912
  2,092
  2,107
  2,122
  2,139
  2,156
  2,175
  2,194
  2,214
  2,236
  2,259
  526
  552
  578
  606
  635
  666
  699
  733
  769
  806
  846
  888
  931
  977
  1,026
  1,076
  1,130
  1,186
  1,245
  1,306
Funds from operations, $m
  2,630
  6,046
  6,262
  6,489
  6,730
  6,984
  7,252
  7,535
  7,834
  8,149
  8,480
  8,355
  8,723
  9,110
  9,517
  9,946
  10,396
  10,870
  11,368
  11,892
  12,443
  13,021
  13,630
  14,269
  14,940
  15,646
  16,387
  17,166
  17,984
  18,844
  19,746
Change in working capital, $m
  -575
  58
  62
  66
  69
  73
  77
  82
  86
  91
  96
  101
  106
  112
  118
  124
  130
  137
  144
  151
  159
  167
  176
  185
  194
  204
  214
  225
  236
  248
  261
Cash from operations, $m
  3,205
  5,988
  6,200
  6,424
  6,660
  6,911
  7,175
  7,454
  7,748
  8,058
  8,385
  8,254
  8,617
  8,998
  9,400
  9,822
  10,266
  10,733
  11,224
  11,741
  12,284
  12,854
  13,454
  14,084
  14,746
  15,442
  16,173
  16,941
  17,748
  18,595
  19,485
Maintenance CAPEX, $m
  0
  -323
  -336
  -351
  -366
  -383
  -400
  -419
  -438
  -458
  -480
  -503
  -526
  -552
  -578
  -606
  -635
  -666
  -699
  -733
  -769
  -806
  -846
  -888
  -931
  -977
  -1,026
  -1,076
  -1,130
  -1,186
  -1,245
New CAPEX, $m
  -584
  -401
  -438
  -463
  -490
  -518
  -547
  -577
  -609
  -642
  -676
  -712
  -750
  -789
  -831
  -874
  -919
  -967
  -1,017
  -1,069
  -1,123
  -1,181
  -1,241
  -1,304
  -1,370
  -1,440
  -1,513
  -1,589
  -1,670
  -1,754
  -1,842
Cash from investing activities, $m
  -514
  -724
  -774
  -814
  -856
  -901
  -947
  -996
  -1,047
  -1,100
  -1,156
  -1,215
  -1,276
  -1,341
  -1,409
  -1,480
  -1,554
  -1,633
  -1,716
  -1,802
  -1,892
  -1,987
  -2,087
  -2,192
  -2,301
  -2,417
  -2,539
  -2,665
  -2,800
  -2,940
  -3,087
Free cash flow, $m
  2,691
  5,264
  5,426
  5,610
  5,804
  6,010
  6,228
  6,458
  6,701
  6,958
  7,228
  7,040
  7,340
  7,657
  7,991
  8,342
  8,711
  9,100
  9,509
  9,939
  10,392
  10,867
  11,367
  11,892
  12,445
  13,025
  13,635
  14,275
  14,949
  15,656
  16,399
Issuance/(repayment) of debt, $m
  0
  1,686
  1,821
  1,928
  2,039
  2,155
  2,276
  2,401
  2,533
  2,670
  2,813
  2,963
  3,120
  3,284
  3,456
  3,636
  3,825
  4,022
  4,229
  4,447
  4,674
  4,913
  5,163
  5,426
  5,702
  5,991
  6,294
  6,612
  6,946
  7,297
  7,664
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
  1,686
  1,821
  1,928
  2,039
  2,155
  2,276
  2,401
  2,533
  2,670
  2,813
  2,963
  3,120
  3,284
  3,456
  3,636
  3,825
  4,022
  4,229
  4,447
  4,674
  4,913
  5,163
  5,426
  5,702
  5,991
  6,294
  6,612
  6,946
  7,297
  7,664
Total cash flow (excl. dividends), $m
  2,646
  6,950
  7,247
  7,537
  7,843
  8,165
  8,503
  8,859
  9,234
  9,628
  10,042
  10,003
  10,460
  10,941
  11,447
  11,978
  12,536
  13,123
  13,739
  14,386
  15,066
  15,780
  16,530
  17,319
  18,146
  19,016
  19,929
  20,888
  21,895
  22,952
  24,063
Retained Cash Flow (-), $m
  -2,056
  -1,096
  -1,145
  -1,212
  -1,282
  -1,355
  -1,431
  -1,510
  -1,592
  -1,678
  -1,769
  -1,863
  -1,961
  -2,065
  -2,173
  -2,286
  -2,404
  -2,529
  -2,659
  -2,795
  -2,939
  -3,089
  -3,246
  -3,411
  -3,584
  -3,766
  -3,957
  -4,157
  -4,367
  -4,587
  -4,818
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
 
  5,854
  6,102
  6,325
  6,561
  6,810
  7,073
  7,350
  7,642
  7,949
  8,273
  8,140
  8,499
  8,877
  9,274
  9,692
  10,132
  10,594
  11,080
  11,591
  12,127
  12,692
  13,284
  13,907
  14,562
  15,250
  15,972
  16,731
  17,528
  18,365
  19,245
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
 
  5,482
  5,316
  5,092
  4,846
  4,578
  4,293
  3,992
  3,679
  3,358
  3,035
  2,563
  2,270
  1,985
  1,713
  1,457
  1,221
  1,007
  817
  651
  509
  390
  292
  214
  154
  107
  73
  48
  31
  19
  12
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. is a health benefits company. The Company operates through three segments: Commercial and Specialty Business, Government Business and Other. It offers a spectrum of network-based managed care 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; indemnity plans and other hybrid plans, including consumer-driven health plans; and hospital only and limited benefit products. It also provides an array 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. It provides an array of specialty and other insurance products and services, such as dental, vision, life and disability insurance benefits and radiology benefit management.

FINANCIAL RATIOS  of  Anthem (ANTM)

Valuation Ratios
P/E Ratio 20.8
Price to Sales 0.6
Price to Book 2
Price to Tangible Book
Price to Cash Flow 16
Price to Free Cash Flow 19.6
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 4.3% 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 262.571 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.

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COMPANY NEWS

▶ 3 reasons Express Scripts could be headed for trouble   [Oct-21-17 11:15AM  MarketWatch]
▶ Yahoo Finance Live: Market Movers - Oct 20th, 2017   [Oct-20-17 07:20AM  Yahoo Finance Video]
▶ [$$] Anthem to Launch Its Own Pharmacy-Benefit Manager   [12:01AM  The Wall Street Journal]
▶ [$$] Investors Need to Watch This Nasty Drug-Price Feud   [12:01AM  The Wall Street Journal]
▶ [$$] Anthem to Launch Its Own Pharmacy-Benefit Manager   [03:35PM  The Wall Street Journal]
▶ [$$] Investors Need to Watch This Nasty Drug-Price Feud   [11:27AM  The Wall Street Journal]
▶ Shared Labs: A Jacksonville giant is emerging on the global stage   [Oct-03-17 11:15AM  American City Business Journals]
▶ Obamacare Lives! Here's What to Expect Now   [Sep-30-17 09:12AM  Motley Fool]
▶ Is Anthem Inc (ANTM) A Buy At Its Current Price?   [Sep-29-17 12:42PM  Simply Wall St.]
▶ Anthem Meets 80-Plus Relative Strength Rating Benchmark   [03:00AM  Investor's Business Daily]
▶ [$$] Health Insurers Stay in ACA Despite Fears of Last-Minute Exits   [Sep-27-17 07:24PM  The Wall Street Journal]
▶ 3 Value Stocks to Hold for a Decade   [06:08AM  Motley Fool]
▶ Anthem to Acquire HealthSun   [06:00AM  Business Wire]
▶ [$$] Anthem Reverses Decision to Pull Out of ACA Exchange in Virginia   [Sep-15-17 03:59PM  The Wall Street Journal]
▶ Anthem Was the S&P 500s Top Loser on September 12   [Sep-13-17 10:38AM  Market Realist]
▶ The Biggest Loser: Anthem Drops 3.4%   [Sep-12-17 04:59PM  Barrons.com]
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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