CVS (NYSE: CVS) - Best Buddies with Aetna
The CVS acquisition of Aetna is set to become one of the largest healthcare mergers in history. theStockAnalyzer likes CVS, with or without a merger.
5 years ago, CVS was trading in the $50-$60 range. In 2015, the stock topped out around $107 and its price slowly decayed since. CVS closed at $62.27 on 5/3 with technical indicators showing further weakness, though $60 shows to be long-term support.
CVS enjoys a wide economic moat with intrinsic value somewhere in the $100-110 range.
Key Valuation Ratios:
Price/Book $1.78 Debt/Equity .59 Price/Sales .37 Free Cash Flow $4.89b Dividend Yield 3.03% ROE 17.8%
The fate of the acquisition rests with the DOJ and its difficult to guess if the deal goes through and what type of concessions will be required. With only 11% of CVS's business attributable to Aetna, the anti-trust argument doesn't appear to be strong. Additionally, there are several potential positive benefits for the consumer, by having a one-stop healthcare provider under one roof.
The overall experience of Dr visit --> drug dispensing --> PBM/insurance billing is to become a straight-through processing experience. This should allow a more fluid visit, with in-store minute-clinics servicing patients with rapid and convenient treatment for vaccinations, lab tests and treatment of common illnesses and injuries. With more than 9,700 pharmacy locations and over 1,100 walk-in clinics, chances are if your neighborhood doesn't currently have an in-store clinic, it will in the future.
Employees: 160,000 est
Company Profile (Morningstar)
CVS Health has vertically integrated one of the largest retail pharmacy chains in the United States with one of the largest pharmacy benefit managers. This combination makes it one of the premier healthcare firms in the U.S. The company processes approximately 1.3 billion prescriptions per year and operates more than 10,000 retail pharmacies across the U.S. The firm is now seeking to acquire Aetna, which will further extend its vertical reach and create the most integrated healthcare player in the U.S.