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Anthem, Inc. ANTM is one of the largest publicly-traded managed care organizations in terms of membership. Also the company emerges as the largest Blue Cross Blue Shield plan provider in the United States.
Estimates of Anthem have moved north over the past 60 days, reflecting analysts’ confidence in the same. The stock has seen the Zacks Consensus Estimate for 2018 and 2019 being revised 14.9% and 13.8% upward to $15.09 and $16.617, respectively, during the period.
Shares of this Zacks Rank #2 (Buy) company have outperformed its industry in a year’s time. The stock has surged 39.2% compared with the industry’s growth of 33.2%.
Let’s focus on the factors that make Anthem an attractive pick for investors.
Solid 2018 Guidance: Anthem has issued its earnings guidance for 2018. It expects adjusted net income per share to be more than $15.00, up 24.6% year over year. The medical insurer also projects operating revenues in the range of $90.5-$91.5 billion, up 2% from 2017. This upbeat view further instills shareholders' optimism on the stock.
Consistent Top-line Growth: Anthem has witnessed steady revenue growth over the past several years (CAGR of 8% from 2012 to 2017). Revenues have followed this uptrend on the back of a continuous increase in membership as well as rising net investment income. An impressive inorganic improvement has also contributed to this revenue appreciation.
Strong Capital Position: Anthem’s solid cash position has enabled the company to approve regular dividend payouts and stock repurchases. The company has been rewarding shareholders with dividends since 2011 and has hiked the same by about 160% in the last five years. It has also been aggressively engaged in share buy backs, utilizing its excess capital to boost shareholder value.
Positive Earnings Surprise History: Anthem boasts an encouraging earnings surprise history, having outpaced the Zacks Consensus Estimate in each of the trailing four quarters with an average beat of 9.6%.
Attractive Valuation: Going by the price to earnings (P/E) ratio, Anthem is trading at a trailing 12-month P/E multiple of 19.4x, lower than the industry average of 21.1x. This also compares favorably with the S&P 500 index’s average of 21.6x. The company’s valuation indicates that the stock is relatively undervalued compared with its peers. The stock carries an impressive Value Score of B. Back tested results have shown that stocks with a Value Score of A or B combined with a favorable Zacks Rank #1 (Strong Buy) or 2 offer best investment bets.
Other Stocks to Consider
A few other top-ranked stocks in the same space with a Zacks Rank of 2 are WellCare Health Plans, Inc. WCG, UnitedHealth Group Incorporated UNH and Humana Inc. HUM. You can see the complete list of today’s Zacks #1 Rank stocks here.
WellCare Health provides managed care health plans, primarily through Medicaid, Medicare Advantage and Medicare Prescription Drug plans across the country. Its earnings surpassed estimates in each of the last four quarters with an average positive surprise of 53.8%.
UnitedHealth Group operates as a diversified health care company in the United States. Its earnings exceeded estimates in each of the trailing four quarters with an average beat of 4.8%.
Humana is a for-profit American health insurance company that has delivered positive surprises in each of the last four quarters with an average positive surprise of 7%.
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