CVS

CVS Health Stock in Brief

We've been asking ourselves recently if the market has placed a fair valuation on CVS Health. Let's dive into some of the fundamental values of this large-cap Consumer Staples company to determine if there might be an opportunity here for value-minded investors.

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

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 10.5 and a P/B ratio of 1.18.

CVS Health's PEG ratio is 1.97, 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.

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.

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.

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