Company Review Thursday · CVS

Company Review Thursday: CVS Health Corporation

Not too long ago I read this article about two companies in my portfolio that made me smile. One of them is Amgen and I’ve already done a review on that company. I still like that company and what their doing in the biotech space.  The other company in the article is CVS Pharmacy, which more commonly known to the masses. Since you kind of know what kind of business CVS runs, I won’t discuss too much of the background and just jump right in on why I think it’s a good addition to a portfolio.

Company Snapshot

Name: CVS Health Corporation (as of 10:54 am 5/5/2016)

Ticker: CVS
Current Price: $105.29
52 Week High Price:$81.37 81.37
52 Week Low Price: $113.65
Market Capitalization: $111.13B (Large Capital)
Price/Earnings (P/E Ratio): 21.81
Earnings/Share (EPS): $4.63
Dividend: $1.70/year (1.63% yield)
Industry: Consumer Staples
Primary Business: Food/Staples Retailing

 

The Good, The Bad and The Ugly

I’m just going to be upfront about how I feel about CVS. If you don’t own it, its actually worth buying at this $105.29 price tag I think. They have just started taking ownership of the pharmacies in Target stores so you’ll start seeing MinuteClinic inside Target where the pharmacy is usually located. Having presence outside of CVS stores that MinuteClinic is bound to generate more revenue. CVS doesn’t have to build the facility, the facility is already built and ready to be used, so set up cost are a lot less than if they had to start from the ground up. Also seeing as not many people like scheduling doctors appointments anyway for the “hassle”, the more convenient locations that treat minor issues will definitely be popular with convenience seeking patients.

Side note: One thing I do wonder about the MinuteClinic boom is if CVS will ever spin it off as its own company. I highly doubt it because the pharmacy is what draws a lot of people to CVS versus going to Walgreens and Rite-Aid. But I do want one of the companies I own to spin off a portion of their business just so I can see how that whole thing works up close. Just a personal level of curiosity.

But something that is kind of interesting to follow is the Total Debt to Capital Ratio. The chart below shows the Total Debt in grey and the Capital in blue. You’ll see over the years both metrics have grown proportionally, which is fine, but I do wonder what it will take to grow capital at a faster rate than debt. Kicking the cigarettes from stores was a huge blow to revenue, but they are trying to make up ground by increasing the line of beauty products and healthy foods.

CVSDiagram
Based on MarketWatch Data

Lastly, I’ve been watching closely the competition between CVS and Walgreens over the last 6 months to see who would come out ahead. Looking at stock price alone CVS has come out on top. Six months ago both were trading at about $98.70/share and now CVS is at 105.25 and Walgreens has fallen to $81.50. CVS was a first mover to remove the cigarettes from behind their counters in 2014 and it seems like that has benefited them and become an important differentiator for them. The more health conscious consumer would seem more likely to walk into the doors of CVS, but the smokers would still definitely lean towards Walgreens.

So hop on board and invest in CVS. Analysts seem to agree with me since they’ve raised their price targets on the company to about $113- $115/share. Seems like something is out there to be gained by focusing on convenient healthcare.

Until next post folks…

*Nothing in this post is any type of advice. Just giving my perspective on this company*

One thought on “Company Review Thursday: CVS Health Corporation

  1. I’ve been loosely following CVS since they bought out Target’s pharmacy business. I want to own it, but I’d need a major pullback to get in for my style of investing. Seems like you don’t think there will be one, and it looks like you might be right. Great company.

    Liked by 1 person

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