The Relative Strength At New High screen looks for leading stocks whose relative strength lines are making new highs. It’s today’s screen of the day. From this insurance portfolio Elevance Health (ELV) leads the Managed Health Care Industry Group and meets all criteria of the IBD checklist.
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The relative strength line compares a stock’s price performance to that of the S&P 500.
Insurance Stock Relative Strength Line Hits High
Elevance’s relative strength line made a new high, as indicated by the blue dot on the MarketSmith chart.
Shares broke out of a choppy base and hit the buy point of 533.78 in large volume on Wednesday. Shares are in the 5% buy zone to 560.47. The stock has been gaining strength since reporting strong third-quarter gains on Oct. 19.
ELV stock has a Relative Strength Rating of 91, meaning it has outperformed 91% of stocks in the IBD database.
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Group’s leading insurance stock
Elevance focuses its long-term goals on health equity and aims to ensure that people with disabilities and rural dwellers find accessible care. Elevance officially changed its name from Anthem in June.
The company offers health, behavioral, clinical and pharmacy plans to its members. It is the largest provider of Blue Cross Blue Shield branded covers and operates in 14 states.
Short-term goals include advances in maternal and behavioral health. Elevance’s companies consist of Anthem, WellPoint and Carelon.
The insurance stock ranks first out of 14 stocks in the managed care group. The group ranks a high 22nd out of 197 IBD industry groups. The health insurance giant is only the second largest United Health Group (UNH) in terms of market capitalization.
The CAN SLIM investment strategy looks for stocks in the top 40 of the 197 industry groups. The group has a respectable Relative Strength Rating of 89.
Result report starts the start
Elevance topped estimates for Q3 sales and earnings per share on Oct. 19, sending shares up 2% on higher volume. Management also provided full-year EPS guidance, which was better than analysts had expected.
Management said it sees growth in the company’s Medicare Advantage and Affordable Care Act barter business. It added: “The overall cost structure of the healthcare system is still slightly higher than without Covid-19.
Quarterly sales have shown consistent double-digit growth, although it has slowed over the past two quarters. Revenue growth for the third quarter was 11%, up from 14% in June and 18% in March.
The CAN SLIM investment strategy looks for growth stocks with 25% or more EPS growth over the last quarter or two plus strong annual growth.
Analysts are forecasting the insurance stock to grow 12% in EPS in 2022 and 13% in 2023. According to IBD Stock Checkup, the company has a three-year compounded annual revenue growth rate of 14%.
Basics make the grade
Elevance receives a high composite rating of 96 and an EPS rating of 92. It has an A-SMR rating. The rating is a combination of three measures: revenue growth, profit margins, and return on equity or ROE.
The company has an Earnings Stability Rating of 7, which represents a stable historical earnings history over a three to five year period. The scale goes from 1 to 99, with a lower number being better.
The insurance stock has an acceptable return on equity of 19%, a measure of profitability and financial efficiency.
Institutions like the Q3 report
Deutsche Bank raised its price target to 581 and maintained a buy rating on the insurance stock following the earnings release. Morgan Stanley raised the target price to 500 and maintained an equal-weight rating on ELV, while UBS sees a 610 on the stock.
Mutual funds own 54% of the shares, with 3,455 funds owning ELV in September, down slightly from 3,463 in June, but up significantly from 3,146 in March.
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