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What Does CVS Health Corporation's (NYSE:CVS) Share Price Indicate?

Simply Wall St

CVS Health Corporation (NYSE:CVS) saw a double-digit share price rise of over 10% in the past couple of months on the NYSE. As a large-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. But what if there is still an opportunity to buy? Today I will analyse the most recent data on CVS Health’s outlook and valuation to see if the opportunity still exists.

See our latest analysis for CVS Health

What is CVS Health worth?

According to my relative valuation model, the stock seems to be currently fairly priced. I’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 17.34x is currently trading slightly below its industry peers’ ratio of 20.19x, which means if you buy CVS Health today, you’d be paying a fair price for it. And if you believe that CVS Health should be trading at this level in the long run, then there’s not much of an upside to gain from mispricing. In addition to this, it seems like CVS Health’s share price is quite stable, which could mean there may be less chances to buy low in the future now that it’s fairly valued. This is because the stock is less volatile than the wider market given its low beta.

Can we expect growth from CVS Health?

NYSE:CVS Past and Future Earnings, September 19th 2019

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. CVS Health’s earnings over the next few years are expected to increase by 88%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.

What this means for you:

Are you a shareholder? It seems like the market has already priced in CVS’s positive outlook, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at CVS? Will you have enough conviction to buy should the price fluctuate below the true value?

Are you a potential investor? If you’ve been keeping tabs on CVS, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for CVS, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on CVS Health. You can find everything you need to know about CVS Health in the latest infographic research report. If you are no longer interested in CVS Health, you can use our free platform to see my list of over 50 other stocks with a high growth potential.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.