CVS Health (CVS) Shares Slip Despite Stable Cash Flows and Growth in Revenue

Today we're going to take a closer look at large-cap Consumer Staples company CVS Health, whose shares are currently trading at $70.6. We've been asking ourselves whether the company is under or over valued at today's prices... let's perform a brief value analysis to find out!

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

CVS Health Corporation provides health services in the United States. The company belongs to the Consumer Staples sector, which has an average price to earnings (P/E) ratio of 24.36 and an average price to book (P/B) ratio of 4.29. In contrast, CVS Health has a trailing 12 month P/E ratio of 23.5 and a P/B ratio of 1.26.

CVS Health's PEG ratio is 1.84, which shows that the stock is probably overvalued in terms of its estimated growth. For reference, a PEG ratio near or below 1 is a potential signal that a company is undervalued.

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 Expense (MM) -$3,035 -$2,907 -$2,503 -$2,287
Depreciation & Amort. (MM) -$4,371 -$4,441 -$4,512 -$4,224
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.

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.