CVS - Embedded Expectations Analysis - 2021 12 10
CVS Health (CVS) currently trades below corporate but around historical averages relative to Uniform earnings, with a 15.2x Uniform P/E (Fwd. V/E').At these levels, markets are pricing in expectations for Uniform ROA to fade 17%, accompanied by 3% Uniform asset growth.
Meanwhile, analysts expect Uniform ROA to sustain 23%-24% levels through 2022, accompanied by 2% Uniform asset growth.
That said, given the firm's potential capabilities post-Aetna acquisition, there is fundamental potential for stronger-than-priced-in performance.
If the company can execute on its strategy, it could drive Uniform ROA to 26% with 3% Uniform asset growth going forward, which would imply a stock price closer to $168, representing approximately 85% equity upside for the firm.
However, the firm's most recent earnings call suggests management may have concerns about guidance, margins, and debt reduction.
CVS Health is a health company. The company's segments are: Pharmacy Services, which provides a range of pharmacy benefit management solutions, including plan design offerings and administration, formulary management, and retail pharmacy network management services; Retail/Long-Term Care (LTC), which sells prescription drugs and general merchandise, including over-the-counter drugs, provides health care services through its MinuteClinic? walk-in medical clinics and conducts LTC pharmacy operations; and Health Care Benefits, which provides a range of voluntary and consumer-directed health insurance products and related services, including medical, pharmacy, dental and behavioral health plans.
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