Attractive Price to Earnings Ratio
Low Price to Sales Ratio
Strong Free Cash Flow Yield
Reasonable Operating Cash Flow per Share
Manageable Debt Levels
Interest Coverage Ratio
Strong Market Position and Consumer Reach
Focus on Affordable and Accessible Healthcare
Innovative Pricing Models
Growth in Health Services and Innovation
Focus on Medicare and Medicaid Improvements
High EV/EBITDA Ratio
Low Net Profit Margin
Liquidity Concerns
Challenges in Medicare Advantage Business
Projected Decline in Membership
CVS Health demonstrates strong market positioning and a commitment to improving healthcare accessibility but faces significant challenges, particularly in its Medicare Advantage segment. Future growth prospects hinge on effective execution of strategic initiatives and ongoing innovation in healthcare services.
Analysis Date: February 12, 2025
Last Updated: March 11, 2025
Trailing Twelve Months (TTM) values provide a view of the company's performance over the last year.
Benjamin Graham's value investing approach focuses on finding stocks with a significant margin of safety between their intrinsic value and market price.
Intrinsic Value
Estimated fair value based on Graham's formula
$64.10
Current Market Price: $63.75
IV/P Ratio: 1.01x (>1.0 indicates undervalued)
Margin of Safety
Gap between intrinsic value and market price
1.0%
Graham recommended a minimum of 20-30% margin of safety
Higher values indicate a greater potential discount to fair value
Graham Criteria Checklist
Benjamin Graham's value investing checklist for CVS
Positive earnings (5+ years)
Dividend history (5+ years)
P/E ratio ≤ 20 (17.37)
P/B ratio ≤ 1.5 (1.06)
Current ratio ≥ 2.0 (0.81x)
Long-term debt < Net current assets (-4.72x)
Margin of safety (1.0%)
CVS does not meet all Graham criteria
Trailing Twelve Months (TTM) values provide a view of the company's performance over the last year.
CVS has a free cash flow yield of 7.62%, which is a positive indicator of its ability to generate cash relative to its market value.
The operating cash flow per share stands at $7.23, reflecting decent cash generation capabilities from operations.
CVS's net profit margin is only 1.24%, indicating challenges in converting revenue into profit, which is below industry norms.
Profitability metrics measure a company's ability to generate earnings relative to its revenue, operating costs, and other relevant metrics. Higher values generally indicate better performance.
Return on Equity (ROE)
Measures how efficiently a company uses its equity to generate profits
6.16%
Higher values indicate better returns for shareholders
TTM (as of 2025-04-16)
Return on Assets (ROA)
Measures how efficiently a company uses its assets to generate profits
0.65%
Higher values indicate better asset utilization
TTM (as of 2025-04-16)
Gross Profit Margin
Percentage of revenue retained after accounting for cost of goods sold
13.79%
Higher values indicate better efficiency in production
TTM (as of 2025-04-16)
Net Profit Margin
Percentage of revenue retained after accounting for all expenses
1.24%
Higher values indicate better overall profitability
TTM (as of 2025-04-16)
The debt-to-equity ratio is 1.10, which, while indicating some leverage, is typical for the industry and suggests that CVS is managing its debt effectively.
An interest coverage ratio of 2.88 indicates that CVS generates sufficient profits to cover interest expenses, showing reasonable financial stability.
The current ratio of 0.81 and quick ratio of 0.60 suggest potential liquidity issues, indicating that CVS may have difficulty meeting short-term obligations.
Financial health metrics assess a company's ability to meet its financial obligations and its overall financial stability.
Debt to Equity Ratio
Total debt divided by total equity
1.09x
Lower values indicate less financial leverage and risk
Less than 1.0 is conservative, 1.0-2.0 is moderate, >2.0 indicates high risk
Q4 2024
Current Ratio
Current assets divided by current liabilities
0.81x
Higher values indicate better short-term liquidity
Less than 1.0 is concerning, 1.0-2.0 is adequate, greater than 2.0 is good
Q4 2024
CVS Health connects with 185 million Americans through various channels such as retail stores, clinics, health plans, and pharmacy benefits management. This extensive reach provides a unique competitive advantage in the healthcare market.
The leadership emphasizes a commitment to improving outcomes, access, and lowering healthcare costs while ensuring a positive consumer experience. This reflects a strong business model focused on addressing the critical needs of the healthcare system.
CVS introduced CostVantage and TrueCost models aimed at increasing transparency and aligning pharmacy reimbursement with actual costs, which is expected to strengthen profitability and customer satisfaction.
The Aetna segment faced significant challenges with margins, driven by elevated medical costs and underperformance. The business ended the year with negative margins, indicating ongoing issues that need to be addressed.
The health services segment, particularly through Caremark, is expected to drive revenue growth. The company also plans to invest in emerging technologies and further develop integrated healthcare capabilities.
CVS is actively working to stabilize its Medicare Advantage and Medicaid businesses, with initiatives aimed at improving margins and enhancing service delivery. This includes advocating for better reimbursement rates.
The company anticipates a decline in Medicare Advantage and individual exchange membership, which could negatively impact overall revenue and profitability in the short term.