The Relative Strength At New High screen looks for leading stocks whose relative strength lines are making new highs. It is today's Screen Of The Day. From it, insurance stock Elevance Health leads the managed health care industry group and passes all criteria on the IBD checklist.
The relative strength line compares a stock's price performance with that of the S&P 500.
Insurance Stock's Relative Strength Line Hits High
Elevance's relative strength line hit a new high, as indicated by the blue dot on the MarketSmith chart.
Shares broke out of a choppy base, hitting the 533.78 buy point in heavy volume Wednesday. Shares are in the 5% buy zone to 560.47. The stock has been gaining strength since reporting strong Q3 earnings on Oct. 19.
ELV shares hold a 91 Relative Strength Rating, meaning it has outperformed 91% of stocks in the IBD database.
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Leading Insurance Stock In The Group
Elevance focuses its long-term goals on health equity, aiming for people with disabilities and rural residents to find accessible care. Elevance officially changed its name from Anthem in June.
The company offers physical, behavioral, clinical and pharmacy plans to its members. It is the largest provider of Blue Cross Blue Shield-branded coverage and operates in 14 states.
Its near-term goals include progress in maternal health and behavioral health. Elevance's companies consist of Anthem, WellPoint and Carelon.
The insurance stock is ranked first out of 14 stocks in the managed care group. The group is ranked a high 22nd out of 197 IBD industry groups. The health insurance giant is second in size only to UnitedHealth Group in terms of market capitalization.
The CAN SLIM investing strategy looks for stocks in the top 40 of the 197 industry groups. The group has a respectable 89 Relative Strength Rating.
Earnings Report Starts The Takeoff
Elevance beat estimates for Q3 sales and earnings per share on Oct. 19, sending shares up 2% in higher volume. Management also gave full-year EPS guidance that was better than analysts expected.
Management said it sees growth in the company's Medicare Advantage and Affordable Care Act exchange business. It added, "overall cost structure of the health system is still a bit higher than what it would have been" without Covid-19.
Quarterly sales have shown consistent double-digit growth, although it's been decelerating in the last two quarters. Third-quarter sales growth clocked in at 11%, down from 14% in June and 18% in March.
The CAN SLIM investing strategy looks for growth stocks with 25% or higher EPS growth in the most recent quarter or two, plus strong annual growth.
Analysts are projecting EPS growth of 12% for 2022 and 13% for 2023 for the insurance stock. The company has a three-year annual sales growth rate of 14%, according to the IBD Stock Checkup.
Fundamentals Make The Grade
Elevance earns a high 96 Composite Rating and a 92 EPS Rating. It has an A- SMR Rating. The rating is a combination of three gauges: sales growth, profit margins and return on equity, or ROE.
The company has a 7 Earnings Stability Rating, representing stable historical earnings history over a three- to five-year period. The scale ranges from 1 to 99, with a lower number being better.
The insurance stock has an acceptable 19% return on equity, a measure of profitability and financial efficiency.
Institutions Like The Q3 Report
Deutsche Bank raised its price target to 581 and maintained its buy rating on the insurance stock following the earnings release. Morgan Stanley raised the price target to 500 and kept an equal-weight rating on ELV, while UBS sees 610 for the stock.
Mutual funds own 54% of shares, with 3,455 funds owning ELV in September, down slightly from 3,463 in June, but up considerably from 3,146 in March.
