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CVS Health Corp CVS

Morningstar Rating
$68.64 −1.10 (1.58%)
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Company Report

Medicare Advantage Final Rate Notice Weaker Than Anticipated, Cutting Into Our Humana FVE by 5%

In an unusual development, the Centers for Medicare & Medicaid Services released its final Medicare Advantage, or MA, rate notice that matched its initial rate notice, instead of rising. In this final rate notice, the overall increase in MA revenue to insurers remained lower than the risk score trend, which is likely to pressure MA benefits, pricing, and/or insurer profits in 2025. We are reducing our fair value estimate on Humana by 5% on this disappointing development, given its focus on MA and our expectation that its previous profit goal in 2025 and potential growth in subsequent years may be constrained. However, we are not changing our fair value estimates on the other more diverse managed care organizations, or MCOs, that we cover, and market price declines on this news may create more attractive investment opportunities for investors with a long-term investment horizon. Currently, Humana, CVS, and Centene remain the most attractive MCOs on a price/fair value basis.

Price vs Fair Value

CVS is trading within a range we consider fairly valued.
Price
$68.64
Fair Value
$887.00
Uncertainty
Medium
1-Star Price
$634.94
5-Star Price
$59.90
Economic Moat
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Capital Allocation
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Bulls Say, Bears Say

Bulls

CVS' diverse operations create the opportunity to view a patient more holistically by managing both medical and pharmacy benefits, which could lead to revenue and cost synergies for the organization.

Bears

Healthcare reform will likely remain a recurring political topic until universal, affordable coverage is achieved in the U.S., and CVS' stock may experience volatility if scenarios that threaten its prospects gain traction.

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News

Trading Information

Previous Close Price
$69.74
Day Range
$68.3269.86
52-Week Range
$64.4183.25
Bid/Ask
$68.62 / $68.79
Market Cap
$86.52 Bil
Volume/Avg
7.7 Mil / 10.0 Mil

Key Statistics

Price/Earnings (Normalized)
8.14
Price/Sales
0.26
Dividend Yield (Trailing)
3.49%
Dividend Yield (Forward)
3.74%
Total Yield
5.56%

Company Profile

CVS Health offers a diverse set of healthcare services. Its roots are in its retail pharmacy operations, where it operates over 9,000 stores primarily in the U.S. CVS is also the largest pharmacy benefit manager (acquired through Caremark), processing over 2 billion adjusted claims annually. It also operates a top-tier health insurer (acquired through Aetna) where it serves about 26 million medical members. The company's recent acquisition of Oak Street adds primary care services to the mix, which could have significant synergies with all its existing business lines.
Sector
Healthcare
Industry
Healthcare Plans
Stock Style Box
Large Value
Total Number of Employees
300,000

Competitors

Valuation

Metric
CVS
HUM
CI
Price/Earnings (Normalized)
8.1412.2814.26
Price/Book Value
1.202.402.26
Price/Sales
0.260.370.54
Price/Cash Flow
6.8410.1812.76
Price/Earnings
CVS
HUM
CI

Financial Strength

Metric
CVS
HUM
CI
Quick Ratio
0.59
Current Ratio
0.86
Interest Coverage
5.207.864.81
Quick Ratio
CVS
HUM
CI

Profitability

Metric
CVS
HUM
CI
Return on Assets (Normalized)
4.62%5.46%5.00%
Return on Equity (Normalized)
15.38%17.15%16.44%
Return on Invested Capital (Normalized)
8.77%11.21%10.56%
Return on Assets
CVS
HUM
CI
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Healthcare Plans Industry Comparables

Ticker
Name
Morningstar Rating for Stocks
Capital Allocation
Economic Moat
Market Cap
UNH
UnitedHealth Group IncPnsntjngvsCnmnb$407.2 Bil
ELV
Elevance Health IncJtzbzqxtbBskqx$119.7 Bil
CI
The Cigna GroupLzgrcjrwcSqymy$101.4 Bil
HUM
Humana IncDrwhlmwTccrchm$38.5 Bil
CNC
Centene CorpLynzzzskMwlgmt$37.8 Bil
MOH
Molina Healthcare IncShpdbp$22.1 Bil
OSCR
Oscar Health Inc Class AWqm$3.5 Bil
ALHC
Alignment Healthcare IncNcp$888.2 Mil
CLOV
Clover Health Investments Corp Ordinary Shares - Class ATyr$331.9 Mil

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