Intrinsic value of CVS Health - CVS

Previous Close

$68.16

  Intrinsic Value

$160.77

stock screener

  Rating & Target

str. buy

+136%

Previous close

$68.16

 
Intrinsic value

$160.77

 
Up/down potential

+136%

 
Rating

str. 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
  3.50
  3.65
  3.78
  3.91
  4.02
  4.11
  4.20
  4.28
  4.35
  4.42
  4.48
  4.53
  4.58
  4.62
  4.66
  4.69
  4.72
  4.75
  4.77
  4.80
  4.82
  4.84
  4.85
  4.87
  4.88
  4.89
  4.90
  4.91
  4.92
  4.93
Revenue, $m
  177,526
  183,739
  190,446
  197,654
  205,376
  213,623
  222,412
  231,760
  241,685
  252,209
  263,354
  275,144
  287,606
  300,768
  314,659
  329,313
  344,761
  361,041
  378,190
  396,248
  415,257
  435,263
  456,312
  478,453
  501,740
  526,227
  551,971
  579,035
  607,482
  637,379
  668,797
Variable operating expenses, $m
 
  172,214
  178,360
  184,966
  192,042
  199,601
  207,656
  216,222
  225,318
  234,963
  245,176
  252,157
  263,578
  275,640
  288,371
  301,800
  315,958
  330,878
  346,594
  363,143
  380,564
  398,899
  418,189
  438,481
  459,822
  482,263
  505,856
  530,659
  556,729
  584,129
  612,922
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
  172,214
  178,360
  184,966
  192,042
  199,601
  207,656
  216,222
  225,318
  234,963
  245,176
  252,157
  263,578
  275,640
  288,371
  301,800
  315,958
  330,878
  346,594
  363,143
  380,564
  398,899
  418,189
  438,481
  459,822
  482,263
  505,856
  530,659
  556,729
  584,129
  612,922
Operating income, $m
  9,695
  11,526
  12,086
  12,688
  13,333
  14,022
  14,757
  15,538
  16,367
  17,246
  18,177
  22,987
  24,028
  25,128
  26,288
  27,513
  28,803
  30,163
  31,596
  33,105
  34,693
  36,364
  38,123
  39,973
  41,918
  43,964
  46,115
  48,376
  50,752
  53,250
  55,875
EBITDA, $m
  9,695
  17,298
  17,930
  18,608
  19,335
  20,112
  20,939
  21,819
  22,754
  23,744
  24,794
  25,904
  27,077
  28,316
  29,624
  31,003
  32,458
  33,990
  35,605
  37,305
  39,095
  40,978
  42,960
  45,044
  47,237
  49,542
  51,966
  54,514
  57,192
  60,006
  62,964
Interest expense (income), $m
  -1,140
  897
  964
  1,037
  1,117
  1,201
  1,292
  1,388
  1,491
  1,600
  1,715
  1,838
  1,967
  2,104
  2,249
  2,401
  2,562
  2,732
  2,910
  3,099
  3,297
  3,506
  3,725
  3,956
  4,199
  4,455
  4,724
  5,007
  5,304
  5,616
  5,944
Earnings before tax, $m
  8,637
  10,629
  11,122
  11,651
  12,217
  12,821
  13,465
  14,149
  14,876
  15,646
  16,462
  21,149
  22,061
  23,024
  24,040
  25,112
  26,241
  27,432
  28,686
  30,006
  31,396
  32,859
  34,398
  36,016
  37,719
  39,509
  41,391
  43,369
  45,449
  47,634
  49,931
Tax expense, $m
  3,317
  2,870
  3,003
  3,146
  3,299
  3,462
  3,636
  3,820
  4,016
  4,224
  4,445
  5,710
  5,956
  6,216
  6,491
  6,780
  7,085
  7,407
  7,745
  8,102
  8,477
  8,872
  9,287
  9,724
  10,184
  10,667
  11,176
  11,710
  12,271
  12,861
  13,481
Net income, $m
  5,317
  7,759
  8,119
  8,505
  8,918
  9,359
  9,829
  10,329
  10,859
  11,422
  12,017
  15,439
  16,104
  16,807
  17,549
  18,331
  19,156
  20,025
  20,941
  21,904
  22,919
  23,987
  25,110
  26,292
  27,535
  28,841
  30,215
  31,660
  33,178
  34,773
  36,449

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
  94,177
  97,615
  101,309
  105,267
  109,494
  113,999
  118,790
  123,878
  129,272
  134,984
  141,027
  147,415
  154,161
  161,281
  168,792
  176,710
  185,054
  193,844
  203,100
  212,843
  223,097
  233,886
  245,235
  257,171
  269,721
  282,917
  296,789
  311,369
  326,693
  342,797
Adjusted assets (=assets-cash), $m
  91,004
  94,177
  97,615
  101,309
  105,267
  109,494
  113,999
  118,790
  123,878
  129,272
  134,984
  141,027
  147,415
  154,161
  161,281
  168,792
  176,710
  185,054
  193,844
  203,100
  212,843
  223,097
  233,886
  245,235
  257,171
  269,721
  282,917
  296,789
  311,369
  326,693
  342,797
Revenue / Adjusted assets
  1.951
  1.951
  1.951
  1.951
  1.951
  1.951
  1.951
  1.951
  1.951
  1.951
  1.951
  1.951
  1.951
  1.951
  1.951
  1.951
  1.951
  1.951
  1.951
  1.951
  1.951
  1.951
  1.951
  1.951
  1.951
  1.951
  1.951
  1.951
  1.951
  1.951
  1.951
Average production assets, $m
  18,782
  19,476
  20,187
  20,951
  21,770
  22,644
  23,576
  24,567
  25,619
  26,734
  27,915
  29,165
  30,486
  31,881
  33,354
  34,907
  36,545
  38,270
  40,088
  42,002
  44,017
  46,138
  48,369
  50,716
  53,184
  55,780
  58,509
  61,378
  64,393
  67,562
  70,893
Working capital, $m
  4,792
  3,307
  3,428
  3,558
  3,697
  3,845
  4,003
  4,172
  4,350
  4,540
  4,740
  4,953
  5,177
  5,414
  5,664
  5,928
  6,206
  6,499
  6,807
  7,132
  7,475
  7,835
  8,214
  8,612
  9,031
  9,472
  9,935
  10,423
  10,935
  11,473
  12,038
Total debt, $m
  27,531
  27,535
  29,639
  31,900
  34,322
  36,909
  39,666
  42,599
  45,712
  49,013
  52,509
  56,208
  60,117
  64,245
  68,603
  73,200
  78,046
  83,152
  88,532
  94,196
  100,159
  106,435
  113,037
  119,983
  127,287
  134,969
  143,044
  151,534
  160,457
  169,835
  179,691
Total liabilities, $m
  57,632
  57,636
  59,740
  62,001
  64,423
  67,010
  69,767
  72,700
  75,813
  79,114
  82,610
  86,309
  90,218
  94,346
  98,704
  103,301
  108,147
  113,253
  118,633
  124,297
  130,260
  136,536
  143,138
  150,084
  157,388
  165,070
  173,145
  181,635
  190,558
  199,936
  209,792
Total equity, $m
  36,830
  36,541
  37,874
  39,308
  40,844
  42,484
  44,232
  46,091
  48,064
  50,157
  52,374
  54,719
  57,197
  59,814
  62,577
  65,491
  68,563
  71,801
  75,212
  78,803
  82,583
  86,562
  90,748
  95,151
  99,782
  104,652
  109,772
  115,154
  120,811
  126,757
  133,005
Total liabilities and equity, $m
  94,462
  94,177
  97,614
  101,309
  105,267
  109,494
  113,999
  118,791
  123,877
  129,271
  134,984
  141,028
  147,415
  154,160
  161,281
  168,792
  176,710
  185,054
  193,845
  203,100
  212,843
  223,098
  233,886
  245,235
  257,170
  269,722
  282,917
  296,789
  311,369
  326,693
  342,797
Debt-to-equity ratio
  0.748
  0.750
  0.780
  0.810
  0.840
  0.870
  0.900
  0.920
  0.950
  0.980
  1.000
  1.030
  1.050
  1.070
  1.100
  1.120
  1.140
  1.160
  1.180
  1.200
  1.210
  1.230
  1.250
  1.260
  1.280
  1.290
  1.300
  1.320
  1.330
  1.340
  1.350
Adjusted equity ratio
  0.387
  0.388
  0.388
  0.388
  0.388
  0.388
  0.388
  0.388
  0.388
  0.388
  0.388
  0.388
  0.388
  0.388
  0.388
  0.388
  0.388
  0.388
  0.388
  0.388
  0.388
  0.388
  0.388
  0.388
  0.388
  0.388
  0.388
  0.388
  0.388
  0.388
  0.388

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  5,317
  7,759
  8,119
  8,505
  8,918
  9,359
  9,829
  10,329
  10,859
  11,422
  12,017
  15,439
  16,104
  16,807
  17,549
  18,331
  19,156
  20,025
  20,941
  21,904
  22,919
  23,987
  25,110
  26,292
  27,535
  28,841
  30,215
  31,660
  33,178
  34,773
  36,449
Depreciation, amort., depletion, $m
  0
  5,773
  5,844
  5,920
  6,002
  6,089
  6,182
  6,282
  6,387
  6,498
  6,616
  2,917
  3,049
  3,188
  3,335
  3,491
  3,654
  3,827
  4,009
  4,200
  4,402
  4,614
  4,837
  5,072
  5,318
  5,578
  5,851
  6,138
  6,439
  6,756
  7,089
Funds from operations, $m
  -5,461
  13,532
  13,963
  14,425
  14,920
  15,449
  16,012
  16,611
  17,246
  17,920
  18,633
  18,355
  19,153
  19,995
  20,884
  21,822
  22,811
  23,852
  24,949
  26,105
  27,321
  28,601
  29,947
  31,364
  32,853
  34,419
  36,066
  37,797
  39,617
  41,529
  43,539
Change in working capital, $m
  -15,530
  112
  121
  130
  139
  148
  158
  168
  179
  189
  201
  212
  224
  237
  250
  264
  278
  293
  309
  325
  342
  360
  379
  399
  419
  441
  463
  487
  512
  538
  566
Cash from operations, $m
  10,069
  13,420
  13,842
  14,295
  14,781
  15,300
  15,854
  16,442
  17,067
  17,731
  18,433
  18,143
  18,929
  19,759
  20,634
  21,558
  22,533
  23,559
  24,641
  25,780
  26,979
  28,241
  29,568
  30,965
  32,434
  33,979
  35,603
  37,310
  39,105
  40,991
  42,973
Maintenance CAPEX, $m
  0
  -1,878
  -1,948
  -2,019
  -2,095
  -2,177
  -2,264
  -2,358
  -2,457
  -2,562
  -2,673
  -2,792
  -2,917
  -3,049
  -3,188
  -3,335
  -3,491
  -3,654
  -3,827
  -4,009
  -4,200
  -4,402
  -4,614
  -4,837
  -5,072
  -5,318
  -5,578
  -5,851
  -6,138
  -6,439
  -6,756
New CAPEX, $m
  -2,224
  -694
  -711
  -764
  -818
  -874
  -932
  -991
  -1,052
  -1,116
  -1,181
  -1,250
  -1,321
  -1,395
  -1,473
  -1,553
  -1,638
  -1,726
  -1,818
  -1,914
  -2,015
  -2,121
  -2,231
  -2,347
  -2,468
  -2,596
  -2,729
  -2,869
  -3,015
  -3,169
  -3,330
Cash from investing activities, $m
  -2,470
  -2,572
  -2,659
  -2,783
  -2,913
  -3,051
  -3,196
  -3,349
  -3,509
  -3,678
  -3,854
  -4,042
  -4,238
  -4,444
  -4,661
  -4,888
  -5,129
  -5,380
  -5,645
  -5,923
  -6,215
  -6,523
  -6,845
  -7,184
  -7,540
  -7,914
  -8,307
  -8,720
  -9,153
  -9,608
  -10,086
Free cash flow, $m
  7,599
  10,847
  11,184
  11,513
  11,868
  12,249
  12,658
  13,094
  13,559
  14,053
  14,578
  14,102
  14,691
  15,315
  15,974
  16,670
  17,404
  18,179
  18,996
  19,857
  20,763
  21,718
  22,723
  23,781
  24,894
  26,065
  27,296
  28,591
  29,952
  31,383
  32,887
Issuance/(repayment) of debt, $m
  -614
  1,920
  2,104
  2,261
  2,422
  2,587
  2,757
  2,932
  3,113
  3,301
  3,496
  3,698
  3,909
  4,129
  4,358
  4,596
  4,846
  5,107
  5,379
  5,665
  5,963
  6,275
  6,603
  6,945
  7,305
  7,681
  8,076
  8,489
  8,923
  9,378
  9,856
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
  1,920
  2,104
  2,261
  2,422
  2,587
  2,757
  2,932
  3,113
  3,301
  3,496
  3,698
  3,909
  4,129
  4,358
  4,596
  4,846
  5,107
  5,379
  5,665
  5,963
  6,275
  6,603
  6,945
  7,305
  7,681
  8,076
  8,489
  8,923
  9,378
  9,856
Total cash flow (excl. dividends), $m
  2,752
  12,768
  13,287
  13,774
  14,290
  14,836
  15,415
  16,026
  16,672
  17,354
  18,074
  17,800
  18,600
  19,443
  20,331
  21,266
  22,250
  23,286
  24,375
  25,521
  26,726
  27,994
  29,326
  30,727
  32,199
  33,746
  35,372
  37,080
  38,875
  40,761
  42,742
Retained Cash Flow (-), $m
  366
  -1,253
  -1,334
  -1,434
  -1,536
  -1,640
  -1,748
  -1,859
  -1,974
  -2,093
  -2,216
  -2,345
  -2,478
  -2,618
  -2,763
  -2,914
  -3,072
  -3,238
  -3,410
  -3,591
  -3,780
  -3,979
  -4,186
  -4,403
  -4,631
  -4,870
  -5,120
  -5,382
  -5,657
  -5,946
  -6,248
Prev. year cash balance distribution, $m
 
  1,542
  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
 
  13,057
  11,954
  12,340
  12,754
  13,196
  13,667
  14,167
  14,698
  15,261
  15,858
  15,456
  16,122
  16,826
  17,569
  18,352
  19,178
  20,048
  20,965
  21,930
  22,946
  24,015
  25,140
  26,323
  27,568
  28,876
  30,252
  31,698
  33,218
  34,815
  36,494
Discount rate, %
 
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
 
  12,519
  10,943
  10,739
  10,502
  10,228
  9,918
  9,571
  9,187
  8,767
  8,314
  7,340
  6,880
  6,398
  5,898
  5,388
  4,874
  4,362
  3,861
  3,377
  2,916
  2,484
  2,086
  1,725
  1,404
  1,123
  883
  680
  514
  380
  275
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 13.6
Price to Sales 0.4
Price to Book 2
Price to Tangible Book
Price to Cash Flow 7.2
Price to Free Cash Flow 9.2
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 $177526 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 3.5% 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 4.3%, 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 93.8%.

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 3.5% 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 10.6%.

Life of production assets of 10 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 1.8%. 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 - $36830 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 1020.69 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 $69.6 billion.

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COMPANY NEWS

▶ [$$] Selling GE, Schlumberger, CVS and AmEx   [Feb-22-18 06:53AM  Barrons.com]
▶ Amazon Launches Its Own Line of OTC Drugs   [12:45PM  Investopedia]
▶ Amazon is taking pharmacy retail chains head on   [12:24PM  Yahoo Finance Video]
▶ Yahoo Finance Live: Market Movers - Feb 21st, 2018   [07:20AM  Yahoo Finance Video]
▶ Albertsons Might Be Buying a Lemon in Rite Aid   [Feb-20-18 05:54PM  Fortune]
▶ Heres why Albertsons is buying Rite Aid   [11:15AM  Yahoo Finance Video]
▶ Baby Berkshire Bets on Mergers Reshaping Key Industries   [Feb-15-18 04:04PM  GuruFocus.com]
▶ Stocks That Fell to 3-Year Lows in the Week of Feb. 9   [Feb-11-18 09:54AM  GuruFocus.com]
▶ US Companies Give Back as a Result of Tax Overhaul   [Feb-09-18 03:00PM  GuruFocus.com]
▶ 7 Stocks Top Managers Have Been Buying   [06:00AM  Morningstar]
▶ Aetna Who? CVS Blows Wall Street Away With Its Earnings   [Feb-08-18 06:51PM  TheStreet.com]
▶ CVS scores $1.5 billion boost, plans to up wages and reduce Aetna debt   [01:25PM  American City Business Journals]
▶ CVS Health Falls Despite Earnings Beat   [12:34PM  GuruFocus.com]
▶ CVS Health tops Street 4Q forecasts   [09:12AM  Associated Press]
▶ 3 Megacompanies Want to Shake Up Healthcare   [Feb-06-18 09:50PM  Motley Fool]
▶ Helena Foulkes named Hudsons Bay CEO   [Feb-05-18 01:55PM  American City Business Journals]
▶ Yahoo Finance Answers: Will Amazon make my health care cheaper?   [Feb-02-18 12:25PM  Yahoo Finance Video]
▶ [$$] Aetna Profit Rises on Lower Restructuring Costs   [12:42AM  The Wall Street Journal]
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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