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Are Investors Undervaluing CVS Health (CVS) Right Now?

Zacks Equity Research

The proven Zacks Rank system focuses on earnings estimates and estimate revisions to find winning stocks. Nevertheless, we know that our readers all have their own perspectives, so we are always looking at the latest trends in value, growth, and momentum to find strong picks.

Looking at the history of these trends, perhaps none is more beloved than value investing. This strategy simply looks to identify companies that are being undervalued by the broader market. Value investors rely on traditional forms of analysis on key valuation metrics to find stocks that they believe are undervalued, leaving room for profits.

Zacks has developed the innovative Style Scores system to highlight stocks with specific traits. For example, value investors will be interested in stocks with great grades in the "Value" category. When paired with a high Zacks Rank, "A" grades in the Value category are among the strongest value stocks on the market today.

One stock to keep an eye on is CVS Health (CVS). CVS is currently holding a Zacks Rank of #2 (Buy) and a Value grade of A. The stock holds a P/E ratio of 8.78, while its industry has an average P/E of 8.93. Over the past year, CVS's Forward P/E has been as high as 11.05 and as low as 7.34, with a median of 8.50.

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Value investors also use the P/S ratio. The P/S ratio is is calculated as price divided by sales. This is a prefered metric because revenue can't really be manipulated, so sales are often a truer performance indicator. CVS has a P/S ratio of 0.35. This compares to its industry's average P/S of 0.36.

Value investors will likely look at more than just these metrics, but the above data helps show that CVS Health is likely undervalued currently. And when considering the strength of its earnings outlook, CVS sticks out at as one of the market's strongest value stocks.


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