CVS Health Corporation (NYSE:CVS) operates across several areas of healthcare, including health insurance, pharmacy benefit management, and retail pharmacy services. Although its diverse range of businesses provides it with access to a variety of revenue sources, increasing medical costs, pressures relating to reimbursement, and ongoing regulatory scrutiny are still affecting its profitability.
For investors, the main issue is whether CVS’s forward valuation properly takes into account its ability to recover earnings. A low P/E ratio may point to an opportunity, but only on the condition that the company is able to convert its large revenue base into sustainable earnings and cash flow. At the same time, CVS stands out as one of the blue-chip stocks investors can consider for under $100.
CVS Health’s Business Continues to Expand
CVS Health Corporation runs through three main segments: Health Care Benefits, which offers insurance coverage via Aetna; Health Services, which includes CVS Caremark as its pharmacy benefit manager; and Pharmacy & Consumer Wellness, which manages its chain of retail pharmacies.
This arrangement exposes CVS to various parts of the healthcare system and provides opportunities for coordinating insurance, prescription drug benefits, and patient care. Yet each section also faces its own challenges, especially rising medical costs and pressure on pharmacy margins.
The company has been expanding its revenue base, with annual revenue rising from about $292.1 billion in 2021 to $322.5 billion in 2022, to $357.8 billion in 2023, to $372.8 billion in 2024, and then reaching $402.1 billion in 2025. This amounts to a growth of about 38% over the four-year period, a result being due to the scale of its healthcare operations and acquisitions.
Also read: CVS Health (CVS) vs Cigna (CI): Which is a Better Stock to Buy?
Recent results also show a growing trend. In the second quarter of 2026, CVS achieved revenue of $106.1 billion, a year-on-year increase of 7.3%, and adjusted earnings per share rose to $2.58 from $1.81. The company has also raised its full-year adjusted EPS guidance to the range of $7.90 to $8.10. These figures support the argument for an earnings recovery, although the extent to which this improvement can be sustained is still important. CVS may also appeal to investors looking for opportunities in a bear market. See which stocks rank higher than CVS on our list.
CVS Stock Looks Cheap, but Earnings Must Deliver
The forward P/E ratio is a more meaningful measure than the trailing one since the recent reported earnings have been hit by substantial profitability pressures. The stock has a forward P/E of about 10 to 11 times, even though the exact multiple varies depending on the share price and the analysts’ estimates.
At that valuation, CVS has an implied forward earnings yield of about 9% to 10%, indicating that investors are paying a relatively small amount for each dollar of expected earnings. Yet the earnings yield does not guarantee a return; the valuation is based on CVS achieving the profits that the analysts expect. If medical costs go up or if there is fresh pressure on pharmacy operations, then earnings might fail to meet expectations and the apparent discount could become smaller.
The historical P/E of CVS also shows the reason why investors should consider more than just a single valuation figure. Since reported earnings have varied, its trailing valuation has changed significantly. A high trailing price-earnings ratio may indicate only a temporary decline in profits rather than an abnormally high share price, while a low forward price-earnings ratio assumes that earnings will rise.
Investors must therefore consider the forward multiple together with the company’s earnings guidance, its cash generation, and the risks associated with each business segment. There is also a good reason to look at the stock since CVS has been paying dividends continuously for more than fifty years. The amount of its quarterly dividend, which works out to $2.66 per year at that rate, provides an income element alongside the potential gain from earnings growth. The stock has a dividend yield of over 3%; however, it ranks lower than 10 stocks on our high-yield dividend stocks article.
Conclusion
The investment case for CVS Health looks attractive provided that its recovery goes on. This is because of revenue growth, improving adjusted earnings, and the fact that its forward price-to-earnings ratio is relatively low. However, the main risk lies in execution, since continued growth in earnings and cash flow will decide whether the stock’s apparent discount is indeed a real opportunity.
While we acknowledge the risk and potential of CVS as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than CVS and that has 10,000% upside potential, check out our report about this cheapest AI stock.
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This article is originally published at Insider Monkey.
