Last week, CVS Health (NYSE:CVS) soared by 16% after posting quarterly earnings. It erased the pre-election sell-off for a good reason. Revenue grew and guidance for FY 2020 is higher than markets expected.
CVS posted revenue of $67.1 billion, up 3.5% Y/Y. Non-GAAP EPS topped $1.66 ($0.93 EPS GAAP). Speculators who picked at the stock during the September selling fared well. But long-term investors are struggling. The stock is down by over 30% in the last five years. Its dividend is not growing and debt is weighing on the balance sheet.
CVS has a debt/equity of 1.05 times, which is manageable. The stock is dirt cheap at a price-to-earnings ratio of around 10 times.
CVS has several positive catalysts ahead. HealthHUB is in 30 states. It will drive customer traffic, be it through MinuteClinic or higher pharmacy utilization. Covid slowed it down but marketing programs and related activities lifted usage.
Aetna (NYSE:AET)integration is also a positive contributor to revenue growth. For example, Aetna Connected drives utilization into MinuteClinics and the HealthHUBs.
Your Takeaway
Investors who missed the post-earnings rally should wait for profit-takers to sell the stock first. If shares continue on an uptrend pattern, then start a position next.
