Should You Pick CVS Stock At $55?

CVS Health (NYSE: CVS) has experienced a 4% decline in its stock over the past week, mirroring the performance of its competitor, Walgreens. The company reported revenue of $91.2 billion and adjusted earnings of $1.83 per share, slightly below consensus estimates of $91.5 billion and $1.73, respectively. Since early January 2021, CVS stock has fluctuated from approximately $60 to around $55, significantly lagging behind the S&P 500, which has seen a 40% increase during the same period. The stock's performance has been inconsistent, with returns of 55% in 2021, followed by declines of 8% in 2022 and 13% in 2023. In contrast, the S&P 500 recorded returns of 27% in 2021, a drop of 19% in 2022, and a rebound of 24% in 2023. This trend indicates that CVS has underperformed relative to the broader market, while the Trefis High Quality Portfolio has consistently outperformed the S&P 500. Despite these challenges, CVS Health's valuation is estimated at $66 per share, suggesting a potential upside of over 15% from its current price. The forecast is based on a 10x price-to-earnings multiple and expected earnings of $6.61 per share for 2024. The company’s Q2 revenue showed a 2.6% year-over-year increase, driven by a 21% growth in Health Care Benefits. Looking ahead, CVS anticipates earnings between $6.40 and $6.65 per share for 2024, a downward revision from previous guidance of at least $7. While CVS faces headwinds, analysts believe there is still significant growth potential, especially as the stock currently trades at 8x forward earnings, below its five-year average of 10x.