Anthem Inc (NYSE:ANTM): Are Analysts’ Forecast Signalling Trouble Ahead?

In June 2018, Anthem Inc (NYSE:ANTM) released its earnings update. Generally, analyst forecasts appear to be pessimistic, with profits predicted to drop by -8.8% next year against the past 5-year average growth rate of 4.4%. Presently, with latest-twelve-month earnings at US$4.34b, we should see this fall to US$3.96b by 2019. In this article, I’ve outline a few earnings growth rates to give you a sense of the market sentiment for Anthem in the longer term. Investors wanting to learn more about other aspects of the company should research its fundamentals here.

See our latest analysis for Anthem

Can we expect Anthem to keep growing?

Longer term expectations from the 15 analysts covering ANTM’s stock is one of positive sentiment. Since forecasting becomes more difficult further into the future, broker analysts generally project out to around three years. To understand the overall trajectory of ANTM’s earnings growth over these next fews years, I’ve fitted a line through these analyst earnings forecast to determine an annual growth rate from the slope.

NYSE:ANTM Future Profit August 27th 18

This results in an annual growth rate of 11.6% based on the most recent earnings level of US$3.84b to the final forecast of US$4.58b by 2021. This leads to an EPS of $23.68 in the final year of projections relative to the current EPS of $14.7. The bottom-line growth seems to be caused by reduction in costs rather than purely top-line expansion as earnings is increasing at a faster rate. In 2021, ANTM’s profit margin will have expanded from 4.3% to 4.3%.

Next Steps:

Future outlook is only one aspect when you’re building an investment case for a stock. For Anthem, there are three essential factors you should further research:

1. Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.

2. Valuation: What is Anthem worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether Anthem is currently mispriced by the market.

3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Anthem? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!

To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.