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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.

Of these, value investing is easily one of the most popular ways to find great stocks in any market environment. Value investors use fundamental analysis and traditional valuation metrics to find stocks that they believe are being undervalued by the market at large.

Luckily, Zacks has developed its own Style Scores system in an effort to find stocks with specific traits. Value investors will be interested in the system's "Value" category. Stocks with both "A" grades in the Value category and high Zacks Ranks are among the strongest value stocks on the market right now.

One stock to keep an eye on is CVS Health (CVS). CVS is currently sporting a Zacks Rank of #2 (Buy) and an A for Value. The stock is trading with P/E ratio of 8.76 right now. For comparison, its industry sports an average P/E of 10.42. Over the past 52 weeks, CVS's Forward P/E has been as high as 10.72 and as low as 7.23, with a median of 8.74.

Investors will also notice that CVS has a PEG ratio of 1.39. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. CVS's PEG compares to its industry's average PEG of 1.46. Over the last 12 months, CVS's PEG has been as high as 1.63 and as low as 1, with a median of 1.34.

We should also highlight that CVS has a P/B ratio of 1.26. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. This stock's P/B looks attractive against its industry's average P/B of 1.49. Over the past 12 months, CVS's P/B has been as high as 1.58 and as low as 1.06, with a median of 1.28.

Finally, we should also recognize that CVS has a P/CF ratio of 7.18. This figure highlights a company's operating cash flow and can be used to find firms that are undervalued when considering their impressive cash outlook. This stock's P/CF looks attractive against its industry's average P/CF of 8.06. Over the past year, CVS's P/CF has been as high as 9.27 and as low as 6.23, with a median of 7.72.

These are just a handful of the figures considered in CVS Health's great Value grade. Still, they help show that the stock is likely being undervalued at the moment. Add this to the strength of its earnings outlook, and we can clearly see that CVS is an impressive value stock right now.


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