Intrinsic value of CVS Health - CVS

Previous Close

$78.74

  Intrinsic Value

$115.94

stock screener

  Rating & Target

buy

+47%

Previous close

$78.74

 
Intrinsic value

$115.94

 
Up/down potential

+47%

 
Rating

buy

We calculate the intrinsic value of CVS stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Shares outstanding, mln

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  15.81
  2.20
  2.48
  2.73
  2.96
  3.16
  3.35
  3.51
  3.66
  3.79
  3.92
  4.02
  4.12
  4.21
  4.29
  4.36
  4.42
  4.48
  4.53
  4.58
  4.62
  4.66
  4.69
  4.72
  4.75
  4.78
  4.80
  4.82
  4.84
  4.85
  4.87
Revenue, $m
  177,526
  188,830
  193,513
  198,800
  204,682
  211,156
  218,222
  225,886
  234,155
  243,041
  252,556
  262,718
  273,546
  285,060
  297,284
  310,244
  323,968
  338,485
  353,829
  370,033
  387,135
  405,174
  424,192
  444,232
  465,341
  487,568
  510,967
  535,591
  561,498
  588,750
  617,411
Variable operating expenses, $m
 
  177,763
  182,042
  186,874
  192,249
  198,165
  204,622
  211,626
  219,182
  227,302
  235,997
  240,075
  249,970
  260,491
  271,662
  283,505
  296,046
  309,312
  323,333
  338,141
  353,769
  370,253
  387,632
  405,944
  425,234
  445,546
  466,928
  489,429
  513,104
  538,007
  564,198
Fixed operating expenses, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total operating expenses, $m
  167,831
  177,763
  182,042
  186,874
  192,249
  198,165
  204,622
  211,626
  219,182
  227,302
  235,997
  240,075
  249,970
  260,491
  271,662
  283,505
  296,046
  309,312
  323,333
  338,141
  353,769
  370,253
  387,632
  405,944
  425,234
  445,546
  466,928
  489,429
  513,104
  538,007
  564,198
Operating income, $m
  9,695
  11,067
  11,470
  11,926
  12,433
  12,991
  13,600
  14,260
  14,973
  15,739
  16,559
  22,643
  23,576
  24,569
  25,622
  26,739
  27,922
  29,173
  30,496
  31,892
  33,366
  34,921
  36,560
  38,287
  40,107
  42,022
  44,039
  46,161
  48,394
  50,743
  53,213
EBITDA, $m
  9,695
  17,749
  18,190
  18,686
  19,239
  19,848
  20,512
  21,232
  22,010
  22,845
  23,739
  24,695
  25,712
  26,795
  27,944
  29,162
  30,452
  31,816
  33,259
  34,782
  36,389
  38,085
  39,873
  41,756
  43,740
  45,830
  48,029
  50,344
  52,779
  55,340
  58,034
Interest expense (income), $m
  -1,140
  1,458
  1,528
  1,606
  1,695
  1,794
  1,903
  2,021
  2,150
  2,289
  2,438
  2,598
  2,769
  2,951
  3,144
  3,349
  3,567
  3,797
  4,041
  4,299
  4,571
  4,858
  5,161
  5,481
  5,817
  6,172
  6,545
  6,938
  7,352
  7,787
  8,244
Earnings before tax, $m
  8,637
  9,609
  9,943
  10,320
  10,738
  11,197
  11,697
  12,239
  12,823
  13,450
  14,121
  20,045
  20,808
  21,618
  22,478
  23,390
  24,355
  25,376
  26,454
  27,593
  28,795
  30,063
  31,399
  32,807
  34,289
  35,851
  37,494
  39,223
  41,043
  42,956
  44,969
Tax expense, $m
  3,317
  2,594
  2,684
  2,786
  2,899
  3,023
  3,158
  3,305
  3,462
  3,632
  3,813
  5,412
  5,618
  5,837
  6,069
  6,315
  6,576
  6,851
  7,143
  7,450
  7,775
  8,117
  8,478
  8,858
  9,258
  9,680
  10,123
  10,590
  11,082
  11,598
  12,142
Net income, $m
  5,317
  7,014
  7,258
  7,533
  7,839
  8,174
  8,539
  8,935
  9,361
  9,819
  10,308
  14,633
  15,190
  15,781
  16,409
  17,075
  17,779
  18,524
  19,312
  20,143
  21,021
  21,946
  22,921
  23,949
  25,031
  26,171
  27,371
  28,633
  29,961
  31,358
  32,827

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  3,458
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  94,462
  97,235
  99,646
  102,368
  105,397
  108,731
  112,370
  116,316
  120,574
  125,150
  130,050
  135,282
  140,858
  146,787
  153,081
  159,755
  166,822
  174,297
  182,198
  190,542
  199,349
  208,638
  218,430
  228,750
  239,619
  251,065
  263,114
  275,793
  289,134
  303,167
  317,926
Adjusted assets (=assets-cash), $m
  91,004
  97,235
  99,646
  102,368
  105,397
  108,731
  112,370
  116,316
  120,574
  125,150
  130,050
  135,282
  140,858
  146,787
  153,081
  159,755
  166,822
  174,297
  182,198
  190,542
  199,349
  208,638
  218,430
  228,750
  239,619
  251,065
  263,114
  275,793
  289,134
  303,167
  317,926
Revenue / Adjusted assets
  1.951
  1.942
  1.942
  1.942
  1.942
  1.942
  1.942
  1.942
  1.942
  1.942
  1.942
  1.942
  1.942
  1.942
  1.942
  1.942
  1.942
  1.942
  1.942
  1.942
  1.942
  1.942
  1.942
  1.942
  1.942
  1.942
  1.942
  1.942
  1.942
  1.942
  1.942
Average production assets, $m
  18,782
  37,011
  37,929
  38,965
  40,118
  41,386
  42,772
  44,274
  45,894
  47,636
  49,501
  51,493
  53,615
  55,872
  58,268
  60,808
  63,498
  66,343
  69,350
  72,527
  75,879
  79,414
  83,142
  87,069
  91,207
  95,563
  100,149
  104,976
  110,054
  115,395
  121,013
Working capital, $m
  4,792
  3,588
  3,677
  3,777
  3,889
  4,012
  4,146
  4,292
  4,449
  4,618
  4,799
  4,992
  5,197
  5,416
  5,648
  5,895
  6,155
  6,431
  6,723
  7,031
  7,356
  7,698
  8,060
  8,440
  8,841
  9,264
  9,708
  10,176
  10,668
  11,186
  11,731
Total debt, $m
  27,531
  28,292
  29,748
  31,393
  33,222
  35,236
  37,433
  39,817
  42,389
  45,152
  48,112
  51,273
  54,640
  58,221
  62,023
  66,054
  70,322
  74,838
  79,610
  84,650
  89,969
  95,579
  101,494
  107,727
  114,292
  121,205
  128,483
  136,141
  144,199
  152,675
  161,589
Total liabilities, $m
  57,632
  58,730
  60,186
  61,831
  63,660
  65,674
  67,871
  70,255
  72,827
  75,590
  78,550
  81,711
  85,078
  88,659
  92,461
  96,492
  100,760
  105,276
  110,048
  115,088
  120,407
  126,017
  131,932
  138,165
  144,730
  151,643
  158,921
  166,579
  174,637
  183,113
  192,027
Total equity, $m
  36,830
  38,505
  39,460
  40,538
  41,737
  43,057
  44,498
  46,061
  47,747
  49,559
  51,500
  53,572
  55,780
  58,128
  60,620
  63,263
  66,061
  69,022
  72,150
  75,455
  78,942
  82,621
  86,498
  90,585
  94,889
  99,422
  104,193
  109,214
  114,497
  120,054
  125,899
Total liabilities and equity, $m
  94,462
  97,235
  99,646
  102,369
  105,397
  108,731
  112,369
  116,316
  120,574
  125,149
  130,050
  135,283
  140,858
  146,787
  153,081
  159,755
  166,821
  174,298
  182,198
  190,543
  199,349
  208,638
  218,430
  228,750
  239,619
  251,065
  263,114
  275,793
  289,134
  303,167
  317,926
Debt-to-equity ratio
  0.748
  0.730
  0.750
  0.770
  0.800
  0.820
  0.840
  0.860
  0.890
  0.910
  0.930
  0.960
  0.980
  1.000
  1.020
  1.040
  1.060
  1.080
  1.100
  1.120
  1.140
  1.160
  1.170
  1.190
  1.200
  1.220
  1.230
  1.250
  1.260
  1.270
  1.280
Adjusted equity ratio
  0.387
  0.396
  0.396
  0.396
  0.396
  0.396
  0.396
  0.396
  0.396
  0.396
  0.396
  0.396
  0.396
  0.396
  0.396
  0.396
  0.396
  0.396
  0.396
  0.396
  0.396
  0.396
  0.396
  0.396
  0.396
  0.396
  0.396
  0.396
  0.396
  0.396
  0.396

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  5,317
  7,014
  7,258
  7,533
  7,839
  8,174
  8,539
  8,935
  9,361
  9,819
  10,308
  14,633
  15,190
  15,781
  16,409
  17,075
  17,779
  18,524
  19,312
  20,143
  21,021
  21,946
  22,921
  23,949
  25,031
  26,171
  27,371
  28,633
  29,961
  31,358
  32,827
Depreciation, amort., depletion, $m
  0
  6,683
  6,719
  6,760
  6,806
  6,857
  6,912
  6,972
  7,037
  7,106
  7,180
  2,052
  2,136
  2,226
  2,321
  2,423
  2,530
  2,643
  2,763
  2,890
  3,023
  3,164
  3,312
  3,469
  3,634
  3,807
  3,990
  4,182
  4,385
  4,597
  4,821
Funds from operations, $m
  -5,461
  13,697
  13,977
  14,294
  14,645
  15,031
  15,451
  15,907
  16,397
  16,924
  17,489
  16,684
  17,326
  18,007
  18,731
  19,497
  20,309
  21,168
  22,075
  23,033
  24,044
  25,110
  26,234
  27,418
  28,665
  29,978
  31,361
  32,815
  34,346
  35,956
  37,648
Change in working capital, $m
  -15,530
  77
  89
  100
  112
  123
  134
  146
  157
  169
  181
  193
  206
  219
  232
  246
  261
  276
  292
  308
  325
  343
  361
  381
  401
  422
  445
  468
  492
  518
  545
Cash from operations, $m
  10,069
  13,620
  13,888
  14,193
  14,533
  14,908
  15,317
  15,761
  16,240
  16,756
  17,308
  16,491
  17,120
  17,788
  18,498
  19,251
  20,048
  20,892
  21,783
  22,725
  23,719
  24,767
  25,872
  27,037
  28,264
  29,556
  30,916
  32,347
  33,853
  35,438
  37,104
Maintenance CAPEX, $m
  0
  -1,442
  -1,475
  -1,511
  -1,552
  -1,598
  -1,649
  -1,704
  -1,764
  -1,828
  -1,898
  -1,972
  -2,052
  -2,136
  -2,226
  -2,321
  -2,423
  -2,530
  -2,643
  -2,763
  -2,890
  -3,023
  -3,164
  -3,312
  -3,469
  -3,634
  -3,807
  -3,990
  -4,182
  -4,385
  -4,597
New CAPEX, $m
  -2,224
  -817
  -918
  -1,036
  -1,153
  -1,269
  -1,385
  -1,502
  -1,621
  -1,742
  -1,865
  -1,992
  -2,122
  -2,257
  -2,396
  -2,540
  -2,690
  -2,845
  -3,007
  -3,176
  -3,352
  -3,536
  -3,727
  -3,928
  -4,137
  -4,357
  -4,586
  -4,826
  -5,078
  -5,341
  -5,618
Cash from investing activities, $m
  -2,470
  -2,259
  -2,393
  -2,547
  -2,705
  -2,867
  -3,034
  -3,206
  -3,385
  -3,570
  -3,763
  -3,964
  -4,174
  -4,393
  -4,622
  -4,861
  -5,113
  -5,375
  -5,650
  -5,939
  -6,242
  -6,559
  -6,891
  -7,240
  -7,606
  -7,991
  -8,393
  -8,816
  -9,260
  -9,726
  -10,215
Free cash flow, $m
  7,599
  11,361
  11,496
  11,646
  11,828
  12,041
  12,283
  12,555
  12,856
  13,186
  13,545
  12,527
  12,946
  13,396
  13,876
  14,389
  14,936
  15,516
  16,133
  16,786
  17,477
  18,208
  18,981
  19,797
  20,658
  21,566
  22,523
  23,531
  24,593
  25,712
  26,889
Issuance/(repayment) of debt, $m
  -614
  1,290
  1,456
  1,644
  1,829
  2,014
  2,198
  2,384
  2,572
  2,764
  2,960
  3,161
  3,368
  3,581
  3,802
  4,031
  4,268
  4,515
  4,772
  5,040
  5,319
  5,610
  5,915
  6,233
  6,565
  6,913
  7,277
  7,659
  8,058
  8,476
  8,914
Issuance/(repurchase) of shares, $m
  -4,237
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  -4,849
  1,290
  1,456
  1,644
  1,829
  2,014
  2,198
  2,384
  2,572
  2,764
  2,960
  3,161
  3,368
  3,581
  3,802
  4,031
  4,268
  4,515
  4,772
  5,040
  5,319
  5,610
  5,915
  6,233
  6,565
  6,913
  7,277
  7,659
  8,058
  8,476
  8,914
Total cash flow (excl. dividends), $m
  2,752
  12,651
  12,952
  13,290
  13,657
  14,054
  14,481
  14,938
  15,428
  15,949
  16,504
  15,688
  16,314
  16,977
  17,678
  18,420
  19,204
  20,032
  20,905
  21,826
  22,796
  23,819
  24,896
  26,030
  27,223
  28,479
  29,800
  31,190
  32,651
  34,188
  35,803
Retained Cash Flow (-), $m
  366
  -814
  -955
  -1,078
  -1,199
  -1,320
  -1,441
  -1,563
  -1,686
  -1,812
  -1,940
  -2,072
  -2,208
  -2,348
  -2,493
  -2,643
  -2,798
  -2,960
  -3,129
  -3,304
  -3,487
  -3,678
  -3,878
  -4,086
  -4,304
  -4,533
  -4,771
  -5,021
  -5,283
  -5,557
  -5,844
Prev. year cash balance distribution, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  11,837
  11,997
  12,212
  12,458
  12,734
  13,040
  13,376
  13,741
  14,137
  14,564
  13,616
  14,106
  14,629
  15,186
  15,778
  16,406
  17,071
  17,776
  18,521
  19,309
  20,140
  21,018
  21,943
  22,919
  23,946
  25,029
  26,168
  27,368
  28,631
  29,959
Discount rate, %
 
  6.00
  6.30
  6.62
  6.95
  7.29
  7.66
  8.04
  8.44
  8.86
  9.31
  9.77
  10.26
  10.78
  11.31
  11.88
  12.47
  13.10
  13.75
  14.44
  15.16
  15.92
  16.72
  17.55
  18.43
  19.35
  20.32
  21.33
  22.40
  23.52
  24.70
PV of cash for distribution, $m
 
  11,167
  10,618
  10,077
  9,523
  8,956
  8,375
  7,784
  7,185
  6,582
  5,981
  4,882
  4,368
  3,868
  3,386
  2,929
  2,501
  2,107
  1,748
  1,428
  1,147
  905
  701
  532
  396
  287
  204
  141
  95
  63
  40
Current shareholders' claim on cash, %
  100
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

CVS Health Corporation, together with its subsidiaries, is an integrated pharmacy healthcare company. The Company provides pharmacy care for the senior community through Omnicare, Inc. (Omnicare) and Omnicare's long-term care (LTC) operations, which include distribution of pharmaceuticals, related pharmacy consulting and other ancillary services to chronic care facilities and other care settings. It operates through three segments: Pharmacy Services, Retail/LTC and Corporate. The Pharmacy Services Segment provides a range of pharmacy benefit management (PBM) solutions to its clients. As of December 31, 2016, the Retail/LTC Segment included 9,709 retail locations (of which 7,980 were its stores that operated a pharmacy and 1,674 were its pharmacies located within Target Corporation (Target) stores), its online retail pharmacy Websites, CVS.com, Navarro.com and Onofre.com.br, 38 onsite pharmacy stores, its long-term care pharmacy operations and its retail healthcare clinics.

FINANCIAL RATIOS  of  CVS Health (CVS)

Valuation Ratios
P/E Ratio 15.7
Price to Sales 0.5
Price to Book 2.3
Price to Tangible Book
Price to Cash Flow 8.3
Price to Free Cash Flow 10.6
Growth Rates
Sales Growth Rate 15.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -6%
Cap. Spend. - 3 Yr. Gr. Rate 2.3%
Financial Strength
Quick Ratio 2
Current Ratio 0
LT Debt to Equity 69.5%
Total Debt to Equity 74.8%
Interest Coverage -7
Management Effectiveness
Return On Assets 4.9%
Ret/ On Assets - 3 Yr. Avg. 5.5%
Return On Total Capital 8.2%
Ret/ On T. Cap. - 3 Yr. Avg. 8.8%
Return On Equity 14.4%
Return On Equity - 3 Yr. Avg. 13.5%
Asset Turnover 1.9
Profitability Ratios
Gross Margin 16.3%
Gross Margin - 3 Yr. Avg. 17.3%
EBITDA Margin 4.2%
EBITDA Margin - 3 Yr. Avg. 4.8%
Operating Margin 5.5%
Oper. Margin - 3 Yr. Avg. 5.9%
Pre-Tax Margin 4.9%
Pre-Tax Margin - 3 Yr. Avg. 5.3%
Net Profit Margin 3%
Net Profit Margin - 3 Yr. Avg. 3.2%
Effective Tax Rate 38.4%
Eff/ Tax Rate - 3 Yr. Avg. 39.1%
Payout Ratio 34.6%

CVS stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CVS stock intrinsic value calculation we used $184765 million for the last fiscal year's total revenue generated by CVS Health. The default revenue input number comes from 2016 income statement of CVS Health. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our CVS stock valuation model: a) initial revenue growth rate of 2.2% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 6%, whose default value for CVS is calculated based on our internal credit rating of CVS Health, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of CVS Health.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of CVS stock the variable cost ratio is equal to 94.2%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for CVS stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 5.4% for CVS Health.

Corporate tax rate of 27% is the nominal tax rate for CVS Health. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the CVS stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for CVS are equal to 19.6%.

Life of production assets of 25.1 years is the average useful life of capital assets used in CVS Health operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for CVS is equal to 1.9%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $37691 million for CVS Health - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 1018.06 million for CVS Health is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of CVS Health at the current share price and the inputted number of shares is $80.2 billion.

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Financial statements of CVS
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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