CVS Pharmacy - A Good Time To Buy Its Stock As Even Top Executive Reaps What He Sows

Rhode Island based health drugstore company beats analysts’ expectations as CEO Larry Merlo reaps the benefits of a strong year

CVS Health Corp (CVS) seems to have had a good year. Revenues from the Rhode Island based pharmacy retailer, whose business spans from its flagship retail drugstores to a pharmacy benefits manager, has been recorded to approximately $140 billion, a 10% rise from last year as a whole. Quarterly breakdown shows that the company has recorded revenues at $37.06 billion, a 30% increase from last quarter. Furthermore, net revenue clocked in at $4.6 billion, a 1% increase, which is not entirely significant to consider.

Despite the low profit margins at 6.31% of its total revenue, these figures are good enough for the top executive CEO, Larry Merlo, to treat himself with a $32 million compensation in addition to $11 million stock value that is a 2% increase from last year.  The CEO has also received $6.5 million in stock awards, an $8 million compensation, etc. If this is a good factor from his part, then it is not a surprise that, of the 45 analysts who have been tracking the company’s performance, more than half are strongly recommending investors to buy this ‘piece of gold mine’, while saying that existing investors should hold it. The company has announced a quarterly dividend of $0.35 for the given quarter.

In addition, the company’s balance sheet shows a very healthy pulse in terms of debt to equity ratio, which is around 0.341, as compared to its competitor, Rite Aid, whose debt to equity ratio stands at a negative 3.21%. Even though the CVS may have a lower forward P/E ratio, it should not be a major concern as its trailing P/E ratio is higher (26.30) than that of Rite Aid (24.60).

Financial analysts covering the health care sector attribute CVS’s stellar performance on two key factors. Firstly, the increase in the number of baby boomers who are retiring from the workplace and increasing demands for health care. Secondly, the Obamacare is creating new healthcare services for customers, while providing lucrative opportunities for CVS to cash on it. Although the program will probably face some threats from Republicans, who want to repeal it, as it is proving costly for ordinary Americans to foot the bill.

Even if it the aforementioned care program face setbacks, CVS still has a healthy customer base, consisting of baby boomers to cater.

CVS Health Pharmacy stock was traded at $103.83; a gain of 1.30% points from recent trading at more than $102, suggesting that the strong financial news has indeed provided a strong positive trigger to the market.