CVS Health (CVS) stock is trading at 7.8x its 2019 estimated EPS of $6.79, which seems low given the long-term growth prospects. Barring near-term challenges, CVS Health’s EPS are expected to stabilize in fiscal 2020 and post high-single-digit growth. Meanwhile, the company’s strategic initiatives are expected to drive its sales and earnings further. Also, CVS offers a dividend yield of 3.5%, which makes it an attractive bet.
However, we believe the near-term pressure on earnings is likely to set the direction of CVS Health stock and restrict its upside.
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CVS Health stock is down 19.2% on a YTD basis as of April 24 and has underperformed the broader markets. The S&P 500 Index has grown by 16.8% during the same period. In comparison, Walgreens Boot Alliance (WBA) stock is down 22.1% on a YTD basis and trades at a forward PE multiple of 8.9x.
Rating and target price
Among the 28 analysts covering the stock, 19 analysts recommend a “buy” on CVS Health stock. Meanwhile, nine analysts have a “hold” recommendation. Analysts have a consensus target price of $71.96 per share on CVS, which implies an upside of 36.0% based on its closing price of $52.93 on April 24.