Should You Buy CVS Stock on the Dip?
Key Points
CVS Health recently posted a revenue jump of 7% year over year.
Its shares today seem reasonably valued -- or a bit undervalued.
Shares of CVS Health (NYSE: CVS) haven't exactly dipped much lately. Over the past three months, they're down 2.1% (as of Sept. 10). Still, you might be wondering whether now is a good time to invest in CVS Health -- or whether you should wait for a bigger dip.
Here's a look at CVS Health and its attractiveness.
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Meet CVS Health
CVS Health began in 1963 in Massachusetts as the Consumer Value Store, selling health and beauty items.
Some 63 years later, now headquartered in Rhode Island, it has grown into a $121 billion major "health solutions" company, recently boasting "approximately 9,000 retail pharmacy locations, more than 1,000 walk-in and primary care medical clinics, and a leading pharmacy benefits manager with approximately 87 million plan members."
The company now also encompasses a major health insurance business that reaches more than 35 million people.
CVS is a growing business, with its second quarter featuring revenue of $106 billion, up 7.3% year over year, and adjusted earnings per share (EPS) up 43%. Over the past year, shares are up 32%, and over the past three, five, and 10 years, they've averaged annual gains of 16.2%, 5.2%, and 2.5%, respectively.
CVS is also a dividend-paying stock, with a solid recent dividend yield of 2.8%. Better still, it's a growing dividend. The total annual payout was recently $2.66 per share, up from $2.42 in 2023 and $2 in 2021.
Should you invest in CVS Health now?
Shares of CVS Health seem reasonably valued to slightly overvalued. Its recent forward-looking price-to-earnings (P/E) ratio of 11 is a bit above its five-year average of 10, and the recent price-to-sales ratio of 0.29 is roughly on par with CVS Health's five-year average.
The company's financial performance has improved lately, and one analyst has rated it a buy, with a $120 price target. (The shares recently traded at $95.) A newish growth catalyst is the boom in GLP-1 drugs for weight loss. Take a closer look at CVS if you're intrigued.
Selena Maranjian has no position in any of the stocks mentioned. The Motley Fool recommends CVS Health. The Motley Fool has a disclosure policy.