What Do You Need to Know About CVS Health (CVS) Before Investing?

Now trading at a price of $71.47, CVS Health has moved 1.4% so far today.

CVS Health returned losses of -24.9% last year, with its stock price reaching a high of $107.26 and a low of $66.34. Over the same period, the stock underperformed the S&P 500 index by -29.0%. As of April 2023, the company's 50-day average price was $71.95. CVS Health Corporation provides health services in the United States. Based in Woonsocket, RI, the large-cap Consumer Staples company has 219,000 full time employees. CVS Health has offered a 3.2% dividend yield over the last 12 months.

The Company May Be Profitable, but Its Balance Sheet Is Highly Leveraged:

2019-12-31 2020-12-31 2021-12-31 2022-12-31
Revenue (MM) $256,776 $268,706 $292,111 $322,467
Gross Margins 17.7% 18.2% 17.8% 16.9%
Operating Margins 4.7% 5.2% 5.1% 5.0%
Net Margins 2.58% 2.67% 2.71% 1.34%
Net Income (MM) $6,634 $7,179 $7,910 $4,311
Net Interest Income -$3,035,000 -$2,907,000 -$2,503,000 -$2,287,000
Depreciation & Amort. -$4,371,000 -$4,441,000 -$4,512,000 -$4,224,000
Earnings Per Share $5.08 $5.46 $5.95 $3.01
EPS Growth n/a 7.48% 8.97% -49.41%
Diluted Shares (MM) 1,305 1,314 1,329 1,282
Free Cash Flow (MM) $10,391 $13,428 $15,745 $13,450
Capital Expenditures (MM) -$2,457 -$2,437 -$2,520 -$2,727
Net Current Assets (MM) -$107,977 -$104,645 -$97,610 -$90,873
Current Ratio 0.94 0.91 0.88 0.95
Long Term Debt (MM) $64,699 $59,207 $51,971 $50,476
Net Debt / EBITDA 3.92 3.42 2.77 3.32

CVS Health has growing revenues and a flat capital expenditure trend, a steady stream of strong cash flows, and average operating margins with a stable trend. However, CVS Health has slimmer gross margins than its peers, declining EPS growth, and a highly leveraged balance sheet.

CVS Health's Valuation Is in Line With Its Sector Averages:

CVS Health has a trailing twelve month P/E ratio of 23.9, compared to an average of 24.36 for the Consumer Staples sector. Based on its EPS guidance of $8.91, the company has a forward P/E ratio of 8.1. CVS Health's PEG ratio is 2.66 on the basis of the 9.0% weighted average of the company and the broader market's EPS compound average growth rates. This suggests that the company's shares are overvalued. In contrast, the market is likely undervaluing CVS Health in terms of its equity because its P/B ratio is 1.28 while the sector average is 4.29. The company's shares are currently trading -8.7% below their Graham number.

Analysts Give CVS Health an Average Rating of Buy:

The 22 analysts following CVS Health have set target prices ranging from $76.0 to $143.0 per share, for an average of $98.18 with a buy rating. As of April 2023, the company is trading -26.7% away from its average target price, indicating that there is an analyst consensus of strong upside potential.

CVS Health has a very low short interest because 1.2% of the company's shares are sold short. Institutions own 82.6% of the company's shares, and the insider ownership rate stands at 0.18%, suggesting a small amount of insider investors. The largest shareholder is the Vanguard Group, Inc., whose 9% stake in the company is worth $8,313,418,701.

The above analysis is intended for educational purposes only and was performed on the basis of publicly available data. It is not to be construed as a recommendation to buy or sell any security. Any buy, sell, or other recommendations mentioned in the article are direct quotations of consensus recommendations from the analysts covering the stock, and do not represent the opinions of Market Inference or its writers. Past performance, accounting data, and inferences about market position and corporate valuation are not reliable indicators of future price movements. Market Inference does not provide financial advice. Investors should conduct their own review and analysis of any company of interest before making an investment decision.