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.
