Health Service Provider CVS Health Corporation (SVC) lost 9.9% over the past month amid the market selloff. However, the healthcare sector’s resilience in the face of uncertain economic conditions and the company’s strong fundamentals have helped the stock generate returns of 8.8% over the past year.
On the other hand, drugstore retailer Walgreens Boots Alliance, Inc. (WBA) has not weathered the challenges facing the market well and has lost 31.6% over the past year. The company’s poor fundamentals are the main reason for its underperformance.
WBA sales were $32.45 billion for the quarter ended August 31, 2022, down 5.3% year-over-year. Its net loss was $415 million, compared to income of $627 million a year ago. Its loss per share was $0.48, compared to EPS of $0.72 the year before.
Given the fundamental strength of CVS, Wall Street analysts expect the stock to hit $122.31 in the near term, indicating a 33% upside potentialwhich is much higher than what WBA could see.
Here’s what could shape CVS performance in the short term:
Strong finances
CVS’s total revenue increased 11% year-over-year to $80.64 billion for the second quarter ended June 30, 2022. Its net income was $2.95 billion, up 6 % year-on-year, while its EPS came in at $2.23. , up 6.2% year-on-year. Moreover, his operating result was $4.57 billion, up 5.6% year-over-year.
Attractive estimates
CVS’s EV/Forward Sales of 0.57x is 84.9% lower than the industry average of 3.80x. Its forward EV/EBITDA of 8.94x is 31% below the industry average of 12.94x. Additionally, its 0.39x futures price/sales is 91.2% lower than the industry average of 4.38x, while its 1.51x futures price/book is 40.2% lower. to the industry average of 2.53x.
Robust profit margins
CVS’s trailing 12-month EBITDA margin of 6.14% is 86.4% above the industry average of 3.29%. Its 12-month net profit margin of 2.66% is above the negative industry average of 2.69%.
Additionally, its trailing 12-month ROCE, ROTC, and ROTA are 11.00%, 5.96%, and 3.55%, compared to industry averages of 38.60%, 21.31%, and 29. 63%, respectively.
POWR ratings reflect promising outlook
CVS has an overall rating of A, which equates to a strong buy in our own POWR Rankings system. POWR ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
The stock has a B rating for growth, in line with its strong financials over the last reported quarter. It has a B rating for stability, in sync with its beta of 0.71.
In stock 4 Medical – Pharmacies industry, CVS is ranked first.
Click on here for additional POWR ratings for CVS (Value, Momentum, Sentiment, Quality).
See all the top Medical – Drug Stores stocks here.
Conclusion
While WBA has performed poorly in the past quarter, CVS’s finances have seen steady growth. Additionally, CVS’s revenue is expected to grow 6.9% year-over-year to $312.35 billion in 2022. Its EPS is expected to grow 6.2% annually over the five coming years.
Given the title’s financial strength and profitability, I think CVS might be a better buy than WBA.
CVS shares remained unchanged in after-hours trading on Wednesday. Year-to-date, CVS is down -9.69%, compared to a -21.52% rise in the benchmark S&P 500 over the same period.
About the Author: Riddhima Chakraborty
Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master’s degree in economics, she helps investors make informed investment decisions with her insightful commentary. After…
