Anthem Project Part I & II final .docx

Growth rate the growth rate gl was estimated using

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Growth Rate The growth rate (gL) was estimated using the Long-Term Dividend growth rate combined with expectations of the future (discussed in the Q1 2018 Earnings Call). We estimate this growth rate to be 8.62%. Forward Dividend The forward Dividend (D1) was calculated at a 4% growth rate (2.07*1.04= 2.81). This is in line with the previous two years and matches the company’s goals and objections discussed on the most recent Earning Call. We believe that this trend of 4% will continue into the future. Rate of Return The rate of return (rS) was estimated using the CAPM (discussed in the previous section). We calculated the rate of return using the CAPM at 9.67%. Constant Growth Model Using the formula P0 = D1/(rS - gL) with the three sections of data above we calculated the stock price to be $267.43. This is slightly above the current stock price indicating that Anthem’s stock may be undervalued for its level of risk. Constant Growth Model MBA602 Financial Analysis and Valuation, Group Project –Anthem Inc Valuation Page 19
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gL 8.62% Long Term Growth Expectations D1 $2.81 Based on 4% Growth rS 9.67% Estimated CAPM P0 = D1/(rS - gL) $267.43 Citations “ANTM : Summary for Anthem, Inc.” Yahoo! Finance , Yahoo!, 30 June 2018, “ANTM Stock Price - Anthem Inc. Stock Quote (U.S.: NYSE).” MarketWatch , MarketWatch, . “Anthem (ANTM).” YCharts , “Anthem Inc.” SNL , S&P Global, . MBA602 Financial Analysis and Valuation, Group Project –Anthem Inc Valuation Page 20
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“S&P 500.” Jpmorgan Chase & Co Revenue Growth Rates (JPM), Current and Historic Growth - CSIMarket , Transcripts, SA. “Anthem (ANTM) Q1 2018 Results - Earnings Call Transcript.” Seeking Alpha , Seeking Alpha, 25 Apr. 2018, results-earnings-call-transcript. “^GSPC : Summary for S&P 500.” Yahoo! Finance , Yahoo!, 29 June 2018,^GSPC/. MBA602 Financial Analysis and Valuation, Group Project –Anthem Inc Valuation Page 21
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  • Fall '14
  • Economics, ........., Anthem Inc, Group Project –Anthem

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