CVS - CVS Health: 8x P/E 8% Growth Projection - It's A Market Blind Spot

2024-04-22 13:55:42 ET

Summary

• CVS Health has been underperforming due to changes in the Medicare Advantage program.
• Despite the impact on profits in the near term, CVS' long-term growth prospects remain intact.
• The stock is currently undervalued with a low P/E ratio.
• The valuation is more attractive when gauged by the PEGY ratio that Peter Lynch promoted.

Medicare Advantage headwind

CVS Health Corporation (CVS) has been facing some pretty strong headwinds recently. More specifically, the following chart shows the investment returns from CVS stock with a comparison against the broader market (approximated by SPY). On a year-to-date basis, CVS stock has underperformed by a large margin both in absolute and relative terms. It suffered a loss of more than 10% year-to-date, while SPY delivered a total return of 4.5%....

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