Elevance Health, Inc. (ELV) stock intrinsic value fair value estimate & owner earnings analysis

Elevance Health is one of the largest health insurers in the United States, selling employer and individual health coverage, Medicare and Medicaid managed-care plans, and — through its Carelon division — pharmacy-benefit management and other health services. Its earnings power comes from collecting premiums (or fees) in exchange for managing members' medical costs, and increasingly from Carelon selling services both to its own health plans and to outside customers. What the business is worth today. Stripping out the accounting noise — non-cash charges, stock-based compensation, and the timing swings in receivables, claims payable and other working-capital items — Elevance has generated fairly steady owner earnings per share over the last five years, growing from roughly $24 (2021) to about $28 (2025), with the growth uneven year to year as medical-cost trends and one-time timing effects moved through the numbers. That $24-$30 range is the anchor for this valuation; we did not use trailing-twelve-month results, since those are currently depressed by pressures explained below. What's currently pressuring the business. Two dated, disclosed events matter a great deal to the next few years. First, the enhanced ACA premium subsidies that boosted individual-market enrollment from 2021 through 2025 expired on December 31, 2025; the company has already said this is likely to shrink individual-market enrollment and worsen the health of the members who remain. Second, the federal budget law signed July 4, 2025 (the "One Big Beautiful Bill Act") imposes more frequent Medicaid eligibility checks and new work/community-engagement requirements on Medicaid expansion enrollees, phasing in through 2026-2028. Both changes point toward a smaller, and for a period sicker-on-average, membership base in Elevance's government-sponsored and ACA books. This is consistent with what shows up in the first half of 2026: reported net income fell about 18% from the same period a year earlier, even though revenue grew — a sign the cost-and-membership pressure described above is already showing up in the numbers, not merely a future risk. Because of this, our near-term assumption (year one of the valuation) is that owner earnings per share hold roughly flat to down slightly from 2025's level — not a return to the high-single-digit growth the company posted from 2024 to 2025 — specifically because of the two dated events above, not out of general caution. The three cases: Bear ($430/share): Medicaid and ACA membership losses from the new law and the subsidy expiration run deeper and longer than management currently expects, medical-cost trend stays ahead of the annual repricing cycle for several years, and the more than $30 billion of debt taken on since 2022 (largely to fund the build-out of Carelon) becomes a real constraint in a margin-compressed environment. Owner earnings per share decline for roughly three years before stabilizing at a much smaller member base and growing only slowly thereafter. Base ($707/share): Owner earnings soften through 2026-2027 as described, then Elevance's annual premium-repricing cycle — a mechanism the company has used for decades to catch up to medical-cost trend with roughly a one-year lag — gradually restores margins from 2028 onward. Growth resumes in the low single digits, supported by continued share buybacks (diluted shares outstanding have fallen from 268 million in 2016 to about 225 million in 2025, a demonstrated multi-year pattern) and by Carelon's continuing expansion. Bull ($1,105/share): The OBBBA and subsidy-expiration effects prove less damaging to Elevance specifically, since its Commercial and Medicare Advantage businesses — which are largely untouched by these changes — make up the majority of its book. Repricing catches costs up faster than the base case assumes, and Carelon, which has been the company's fastest-growing segment, becomes a larger share of the overall business, lifting margins. Because the discount rate used throughout this analysis is fixed at a modest 6% for every company we look at (rather than a market-implied "risk rate" that would just reproduce the market's own price), a durable, still-growing earnings stream like this one can produce a substantially higher intrinsic value than the market may currently be assigning it — that is a feature of this method's approach to finding mispriced businesses, not an assumption that nothing can go wrong. What would have to be true for this to be wrong: essentially, for the bear case to be too optimistic, either the Medicaid/ACA membership losses from the 2025 legislation would have to be considerably worse than currently guided, or Elevance's cost-trend/repricing lag would have to persist for materially longer than its historical multi-decade record shows, permanently, rather than for a few transitional years. One item we could not fully reconcile from the filings: the exact segment-level breakdown of Carelon's revenue growth versus the Health Benefits segment was not independently verified in this pass (only consolidated cash-flow-statement detail was pulled); the qualitative growth claims about Carelon in this write-up rely on the company's own segment disclosures rather than a line-by-line reconstruction.