CVS Stock – A Comprehensive Market Analysis

CVS Health logged a 0.4% change during today's morning session, and is now trading at a price of $70.5 per share.

CVS Health returned losses of -30.0% last year, with its stock price reaching a high of $104.83 and a low of $64.41. Over the same period, the stock underperformed the S&P 500 index by -46.0%. As of April 2023, the company's 50-day average price was $69.37. 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 3.4% dividend yield over the last 12 months.

Growing Revenues With Increasing Reinvestment in the Business:

2018 2019 2020 2021 2022 2023
Revenue (MM) $194,579 $256,776 $268,706 $292,111 $322,467 $339,204
Operating Margins 2.0% 5.0% 5.0% 5.0% 2.0% 2.0%
Net Margins 0.0% 3.0% 3.0% 3.0% 1.0% 1.0%
Net Income (MM) -$2 $6,634 $7,192 $8,001 $4,327 $4,327
Net Interest Expense (MM) $2,803 $3,035 $2,907 $2,503 $2,287 $2,393
Depreciation & Amort. (MM) $2,718 $4,371 $4,441 $4,486 $4,224 $4,198
Earnings Per Share -$0.57 $5.08 $5.46 $6.02 $3.26 $2.33
Diluted Shares (MM) 1,044 1,305 1,314 1,329 1,323 1,252
Free Cash Flow (MM) $6,828 $10,391 $13,428 $15,745 $13,450 $17,674
Capital Expenditures (MM) $2,037 $2,457 $2,437 $2,520 $2,727 $2,843
Net Current Assets (MM) -$92,670 -$107,977 -$104,645 -$98,176 -$90,873 -$109,313
Long Term Debt (MM) $71,444 $64,699 $96,646 $88,585 $80,355 $61,419
Net Debt / EBITDA 13.62 5.03 6.75 5.83 7.27 7.22

CVS Health has growing revenues and increasing reinvestment in the business, exceptional EPS growth, and generally positive cash flows. However, the firm has a highly leveraged balance sheet. Finally, we note that CVS Health has average net margins with a stable trend.

A Lower P/B Ratio Than Its Sector Average but Trades Above Its Graham Number:

CVS Health has a trailing twelve month P/E ratio of 10.6, compared to an average of 24.36 for the Consumer Staples sector. Based on its EPS guidance of $8.6, the company has a forward P/E ratio of 8.1. The company doesn't provide forward earnings guidance, and the compound average growth rate of its last 6 years of reported EPS is 31.1%. On this basis, CVS Health's PEG ratio is 0.34. Using instead the 10.8% weighted average of CVS Health's earnings CAGR and the broader market's anticipated 5-year EPS growth rate, the company's PEG ratio is 0.98, which implies that its shares may be underpriced. Additionally, the market is possibly undervaluing CVS Health in terms of its equity because its P/B ratio is 1.22 whereas the sector average is 4.29. The company's shares are currently trading 27.8% above their Graham number.

There's an Analyst Consensus of Strong Upside Potential for CVS Health:

The 22 analysts following CVS Health have set target prices ranging from $76.0 to $110.0 per share, for an average of $90.16 with a buy rating. As of April 2023, the company is trading -23.1% 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 1.1% of the company's shares are sold short. Institutions own 79.9% 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 Vanguard Group Inc, whose 9% stake in the company is worth $8,225,720,181.

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.