Fresh Look At CVS Health (CVS) Valuation After Recent Stock Pullback And Restructuring Charges

Why CVS Health (CVS) Is Back on Investor Radars

CVS Health (CVS) has drawn fresh attention after recent share price pressure, with the stock down about 7.6% over the past month and 1.6% over the past 3 months.

See our latest analysis for CVS Health.

While the 1 month share price return of a 7.61% decline and a weaker recent trend hint at fading short term momentum, the 1 year total shareholder return of 25.42% and 5 year total shareholder return of 32.56% show a very different longer term picture that some investors may weigh against current sentiment and valuation.

If this pullback has you reassessing your watchlist, it could be a good moment to look beyond large caps and check out 27 healthcare AI stocks as potential fresh ideas.

With CVS trading around $76.69 after recent share price pressure, yet carrying a 25.42% 1 year total return and an intrinsic discount estimate above 70%, investors may ask whether this represents a reset that creates a buying window or whether the market is already counting on future growth.

Most Popular Narrative: 26.3% Undervalued

According to the most followed narrative on CVS Health, a fair value of about $104 sits well above the recent $76.69 close. This naturally raises questions about what is driving that gap.

CVS Health has just faced a stock decline of about 10% after its preliminary Q3 earnings miss, which made the entire market aware. The decline is contributed largely to a $1.1 billion charge connected with its Medicare and Individual Exchange businesses and a $1.2 billion restructuring charge for store closures.

Read the complete narrative.

According to yiannisz, this valuation hinges on a turnaround story built around higher earnings, healthier margins, and a different mix of healthcare revenue. Curious which revenue streams, cost levers, and long term earnings profile sit underneath that $104 fair value and how they connect to CVS Health’s shift away from a store first model?

Result: Fair Value of $104 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, this hinges on CVS executing a complex $2b restructuring while managing higher medical costs in Health Care Benefits, which could pressure earnings if cost controls fall short.

Find out about the key risks to this CVS Health narrative.

Another Way To Look At CVS: Earnings Multiple Sends A Different Signal

The DCF-based fair value of $287.93 paints CVS as deeply undervalued, but the earnings multiple tells a different story. At a P/E of 55.2x versus a US Healthcare average of 23.9x, a peer average of 18.9x, and a fair ratio of 42.8x, the stock screens as expensive instead. That gap suggests less room for error if earnings or margins disappoint. This raises a key question: which signal should investors focus on more, the cash flow model or what the market is currently paying per dollar of earnings?

See what the numbers say about this price — find out in our valuation breakdown.

Next Steps

The mixed messages around value and risk can feel a bit conflicted. If you want to move quickly and base your view on the full picture, take a closer look at 3 key rewards and 4 important warning signs.

Looking for more investment ideas?

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• Spot underpriced quality by scanning our list of 54 high quality undervalued stocks that pair solid fundamentals with compelling valuations.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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