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September 01, 2020 1:41pm
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1 Health Care Stocks Insiders Are Buying up Right Now

CVS Health (CVS) insiders have been scooping up its shares lately, indicating the company’s better prospects. Moreover, Wall Street analysts see a more than 30% upside potential in the stock. Given its strong fundamentals, CVS might be an ideal investment now. Keep reading…

Health services provider CVS Health Corporation (CVS) has witnessed insider buying activity over the past few months. In the last six months, insiders were net buyers of 169,511 (or 3.5%) shares of CVS.

The company has a significant record of returning value to shareholders. CVS has paid dividends for 14 consecutive years. Its dividend payouts have increased at 3.2% CAGR over the past three years. Its current dividend yield is 2.37%, and its four-year average yield is 2.79%.

Over the past month, CVS has lost 5.1% to close the last trading session at $93.56. However, it has gained 5% over the past year. Moreover, Wall Street analysts expect the stock to hit $122.00 in the near term, indicating a potential upside of 30.3%.

Here is what could shape CVS’ performance in the near term:

Solid Financials

CVS’ total revenues increased 11% year-over-year to $80.64 billion for the second quarter that ended June 30, 2022. Its net income came in at $2.95 billion, up 6% year-over-year, while its EPS came in at $2.23, up 6.2% year-over-year. Moreover, its operating income came in at $4.57 billion, up 5.6% year-over-year.

Attractive Valuations

CVS’ forward EV/Sales of 0.58x is 84.9% lower than the industry average of 3.82x, while its forward EV/EBITDA of 8.99x is 32.3% lower than the industry average of 13.26x. Also, its forward Price/Sales of 0.39x compares with the industry average of 4.47x, and its forward Price/Book of 1.53x is 40.1% lower than the industry average of 2.55x.

Robust Profitability

CVS’ trailing-12-month EBITDA margin of 6.14% is 88.7% higher than the industry average of 3.25%. Its trailing-12-month net income margin of 2.66% is higher than the negative industrial average of 2.86%.

In addition, its trailing-12-month ROCE, ROTC, and ROTA of 11.00%, 5.96%, and 3.55%, compared with the industry averages of negative 38.79%, 21.44%, and 29.59%, respectively.

POWR Ratings Reflect Promising Outlook

CVS has an overall rating of A, which equates to a Strong Buy in our proprietary POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

The stock has a B grade for Growth and Value, consistent with its solid financials in the latest reported quarter and lower-than-industry valuation multiples, respectively. It has a B grade for Stability, in sync with its beta of 0.71.

In the 4-stock Medical – Drug Stores industry, CVS is ranked first.

Click here for the additional POWR Ratings for CVS (Momentum, Sentiment, Quality).

View all the top stocks in the Medical – Drug Stores industry here.

Bottom Line

The recent insider buying activity might be an indication of the company’s better prospects. Moreover, Street expects CVS’ revenue to increase 6.9% year-over-year to $312.36 billion in 2022. Its EPS is estimated to grow 6% per annum for the next five years. Also, given the stock’s attractive valuations and robust profitability, I think CVS could be an ideal investment now.

CVS shares were trading at $92.94 per share on Thursday afternoon, up $0.21 (+0.23%). Year-to-date, CVS has declined -7.87%, versus a -18.85% rise in the benchmark S&P 500 index during the same period.

About the Author: Riddhima Chakraborty

Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries.


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