Intrinsic value of CVS Health Corporation - CVS

Previous Close

$59.29

  Intrinsic Value

$175.80

stock screener

  Rating & Target

str. buy

+197%

Previous close

$59.29

 
Intrinsic value

$175.80

 
Up/down potential

+197%

 
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

Revenue (in 0001), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 76.9

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   2
   3
   4
   5
   6
   7
   8
   9
   10
   11
   12
   13
   14
   15
   16
   17
   18
   19
   20
   21
   22
   23
   24
   25
   26
   27
   28
   29
   30
   31

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  13.40
  12.56
  11.80
  11.12
  10.51
  9.96
  9.46
  9.02
  8.62
  8.25
  7.93
  7.64
  7.37
  7.14
  6.92
  6.73
  6.56
  6.40
  6.26
  6.13
  6.02
  5.92
  5.83
  5.74
  5.67
  5.60
  5.54
  5.49
  5.44
  5.40
Revenue, $m
  220,653
  248,367
  277,684
  308,572
  341,007
  374,972
  410,459
  447,473
  486,027
  526,146
  567,863
  611,225
  656,287
  703,114
  751,781
  802,373
  854,980
  909,707
  966,662
  1,025,963
  1,087,739
  1,152,124
  1,219,260
  1,289,301
  1,362,405
  1,438,741
  1,518,486
  1,601,828
  1,688,961
  1,780,091
Variable operating expenses, $m
  207,635
  232,267
  258,324
  285,777
  314,605
  344,793
  376,334
  409,232
  443,498
  479,155
  504,713
  543,253
  583,304
  624,924
  668,179
  713,144
  759,902
  808,542
  859,163
  911,870
  966,776
  1,024,001
  1,083,672
  1,145,923
  1,210,897
  1,278,744
  1,349,622
  1,423,695
  1,501,139
  1,582,135
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
  207,635
  232,267
  258,324
  285,777
  314,605
  344,793
  376,334
  409,232
  443,498
  479,155
  504,713
  543,253
  583,304
  624,924
  668,179
  713,144
  759,902
  808,542
  859,163
  911,870
  966,776
  1,024,001
  1,083,672
  1,145,923
  1,210,897
  1,278,744
  1,349,622
  1,423,695
  1,501,139
  1,582,135
Operating income, $m
  13,018
  16,100
  19,360
  22,795
  26,402
  30,179
  34,125
  38,241
  42,529
  46,990
  63,150
  67,972
  72,983
  78,190
  83,602
  89,228
  95,079
  101,165
  107,498
  114,093
  120,963
  128,123
  135,589
  143,378
  151,507
  159,996
  168,864
  178,132
  187,822
  197,956
EBITDA, $m
  26,531
  29,863
  33,388
  37,102
  41,002
  45,086
  49,353
  53,804
  58,439
  63,263
  68,279
  73,493
  78,911
  84,542
  90,394
  96,477
  102,802
  109,382
  116,231
  123,361
  130,789
  138,530
  146,603
  155,024
  163,814
  172,993
  182,581
  192,602
  203,079
  214,037
Interest expense (income), $m
  -1,140
  3,965
  4,974
  6,038
  7,164
  8,350
  9,595
  10,900
  12,262
  13,684
  15,164
  16,705
  18,307
  19,972
  21,702
  23,500
  25,369
  27,312
  29,332
  31,433
  33,620
  35,898
  38,270
  40,742
  43,320
  46,010
  48,817
  51,748
  54,811
  58,011
  61,357
Earnings before tax, $m
  9,052
  11,126
  13,322
  15,631
  18,052
  20,583
  23,226
  25,979
  28,845
  31,826
  46,445
  49,665
  53,011
  56,488
  60,102
  63,859
  67,767
  71,833
  76,065
  80,473
  85,065
  89,853
  94,847
  100,057
  105,497
  111,179
  117,116
  123,322
  129,811
  136,600
Tax expense, $m
  2,444
  3,004
  3,597
  4,220
  4,874
  5,558
  6,271
  7,014
  7,788
  8,593
  12,540
  13,410
  14,313
  15,252
  16,228
  17,242
  18,297
  19,395
  20,538
  21,728
  22,968
  24,260
  25,609
  27,015
  28,484
  30,018
  31,621
  33,297
  35,049
  36,882
Net income, $m
  6,608
  8,122
  9,725
  11,411
  13,178
  15,026
  16,955
  18,965
  21,057
  23,233
  33,905
  36,256
  38,698
  41,236
  43,875
  46,617
  49,470
  52,438
  55,527
  58,745
  62,098
  65,593
  69,238
  73,042
  77,013
  81,161
  85,495
  90,025
  94,762
  99,718

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $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 assets, $m
  222,881
  250,875
  280,489
  311,689
  344,451
  378,759
  414,605
  451,993
  490,937
  531,460
  573,599
  617,399
  662,916
  710,217
  759,375
  810,477
  863,617
  918,896
  976,426
  1,036,327
  1,098,727
  1,163,761
  1,231,576
  1,302,324
  1,376,166
  1,453,273
  1,533,824
  1,618,008
  1,706,021
  1,798,072
Adjusted assets (=assets-cash), $m
  222,881
  250,875
  280,489
  311,689
  344,451
  378,759
  414,605
  451,993
  490,937
  531,460
  573,599
  617,399
  662,916
  710,217
  759,375
  810,477
  863,617
  918,896
  976,426
  1,036,327
  1,098,727
  1,163,761
  1,231,576
  1,302,324
  1,376,166
  1,453,273
  1,533,824
  1,618,008
  1,706,021
  1,798,072
Revenue / Adjusted assets
  0.990
  0.990
  0.990
  0.990
  0.990
  0.990
  0.990
  0.990
  0.990
  0.990
  0.990
  0.990
  0.990
  0.990
  0.990
  0.990
  0.990
  0.990
  0.990
  0.990
  0.990
  0.990
  0.990
  0.990
  0.990
  0.990
  0.990
  0.990
  0.990
  0.990
Average production assets, $m
  59,797
  67,307
  75,252
  83,623
  92,413
  101,617
  111,234
  121,265
  131,713
  142,585
  153,891
  165,642
  177,854
  190,544
  203,733
  217,443
  231,700
  246,531
  261,965
  278,036
  294,777
  312,226
  330,420
  349,400
  369,212
  389,899
  411,510
  434,095
  457,708
  482,405
Working capital, $m
  -3,751
  -4,222
  -4,721
  -5,246
  -5,797
  -6,375
  -6,978
  -7,607
  -8,262
  -8,944
  -9,654
  -10,391
  -11,157
  -11,953
  -12,780
  -13,640
  -14,535
  -15,465
  -16,433
  -17,441
  -18,492
  -19,586
  -20,727
  -21,918
  -23,161
  -24,459
  -25,814
  -27,231
  -28,712
  -30,262
Total debt, $m
  92,107
  111,814
  132,662
  154,627
  177,692
  201,844
  227,080
  253,401
  280,817
  309,346
  339,012
  369,847
  401,891
  435,190
  469,798
  505,774
  543,184
  582,101
  622,602
  664,772
  708,701
  754,486
  802,228
  852,034
  904,019
  958,302
  1,015,010
  1,074,275
  1,136,237
  1,201,041
Total liabilities, $m
  156,909
  176,616
  197,464
  219,429
  242,494
  266,646
  291,882
  318,203
  345,619
  374,148
  403,814
  434,649
  466,693
  499,992
  534,600
  570,576
  607,986
  646,903
  687,404
  729,574
  773,503
  819,288
  867,030
  916,836
  968,821
  1,023,104
  1,079,812
  1,139,077
  1,201,039
  1,265,843
Total equity, $m
  65,973
  74,259
  83,025
  92,260
  101,958
  112,113
  122,723
  133,790
  145,317
  157,312
  169,785
  182,750
  196,223
  210,224
  224,775
  239,901
  255,630
  271,993
  289,022
  306,753
  325,223
  344,473
  364,547
  385,488
  407,345
  430,169
  454,012
  478,930
  504,982
  532,229
Total liabilities and equity, $m
  222,882
  250,875
  280,489
  311,689
  344,452
  378,759
  414,605
  451,993
  490,936
  531,460
  573,599
  617,399
  662,916
  710,216
  759,375
  810,477
  863,616
  918,896
  976,426
  1,036,327
  1,098,726
  1,163,761
  1,231,577
  1,302,324
  1,376,166
  1,453,273
  1,533,824
  1,618,007
  1,706,021
  1,798,072
Debt-to-equity ratio
  1.400
  1.510
  1.600
  1.680
  1.740
  1.800
  1.850
  1.890
  1.930
  1.970
  2.000
  2.020
  2.050
  2.070
  2.090
  2.110
  2.120
  2.140
  2.150
  2.170
  2.180
  2.190
  2.200
  2.210
  2.220
  2.230
  2.240
  2.240
  2.250
  2.260
Adjusted equity ratio
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  6,608
  8,122
  9,725
  11,411
  13,178
  15,026
  16,955
  18,965
  21,057
  23,233
  33,905
  36,256
  38,698
  41,236
  43,875
  46,617
  49,470
  52,438
  55,527
  58,745
  62,098
  65,593
  69,238
  73,042
  77,013
  81,161
  85,495
  90,025
  94,762
  99,718
Depreciation, amort., depletion, $m
  13,513
  13,764
  14,029
  14,308
  14,601
  14,907
  15,228
  15,562
  15,911
  16,273
  5,130
  5,521
  5,928
  6,351
  6,791
  7,248
  7,723
  8,218
  8,732
  9,268
  9,826
  10,408
  11,014
  11,647
  12,307
  12,997
  13,717
  14,470
  15,257
  16,080
Funds from operations, $m
  20,122
  21,886
  23,754
  25,718
  27,778
  29,933
  32,183
  34,527
  36,968
  39,506
  39,035
  41,777
  44,627
  47,588
  50,666
  53,865
  57,193
  60,656
  64,260
  68,013
  71,924
  76,000
  80,252
  84,689
  89,320
  94,157
  99,212
  104,495
  110,019
  115,798
Change in working capital, $m
  -443
  -471
  -498
  -525
  -551
  -577
  -603
  -629
  -655
  -682
  -709
  -737
  -766
  -796
  -827
  -860
  -894
  -930
  -968
  -1,008
  -1,050
  -1,095
  -1,141
  -1,191
  -1,243
  -1,298
  -1,356
  -1,417
  -1,481
  -1,549
Cash from operations, $m
  20,565
  22,357
  24,252
  26,243
  28,330
  30,511
  32,786
  35,156
  37,623
  40,188
  39,744
  42,514
  45,393
  48,384
  51,493
  54,725
  58,088
  61,586
  65,228
  69,021
  72,974
  77,095
  81,393
  85,879
  90,563
  95,455
  100,567
  105,912
  111,500
  117,347
Maintenance CAPEX, $m
  -1,755
  -1,993
  -2,244
  -2,508
  -2,787
  -3,080
  -3,387
  -3,708
  -4,042
  -4,390
  -4,753
  -5,130
  -5,521
  -5,928
  -6,351
  -6,791
  -7,248
  -7,723
  -8,218
  -8,732
  -9,268
  -9,826
  -10,408
  -11,014
  -11,647
  -12,307
  -12,997
  -13,717
  -14,470
  -15,257
New CAPEX, $m
  -7,156
  -7,510
  -7,945
  -8,371
  -8,790
  -9,204
  -9,617
  -10,031
  -10,448
  -10,872
  -11,305
  -11,751
  -12,212
  -12,690
  -13,189
  -13,710
  -14,257
  -14,831
  -15,435
  -16,071
  -16,741
  -17,448
  -18,194
  -18,981
  -19,811
  -20,687
  -21,611
  -22,586
  -23,613
  -24,696
Cash from investing activities, $m
  -8,911
  -9,503
  -10,189
  -10,879
  -11,577
  -12,284
  -13,004
  -13,739
  -14,490
  -15,262
  -16,058
  -16,881
  -17,733
  -18,618
  -19,540
  -20,501
  -21,505
  -22,554
  -23,653
  -24,803
  -26,009
  -27,274
  -28,602
  -29,995
  -31,458
  -32,994
  -34,608
  -36,303
  -38,083
  -39,953
Free cash flow, $m
  11,655
  12,853
  14,063
  15,364
  16,753
  18,226
  19,782
  21,418
  23,133
  24,926
  23,685
  25,633
  27,659
  29,765
  31,953
  34,224
  36,583
  39,032
  41,575
  44,218
  46,965
  49,821
  52,792
  55,884
  59,105
  62,461
  65,960
  69,609
  73,418
  77,394
Issuance/(repayment) of debt, $m
  18,678
  19,708
  20,848
  21,965
  23,065
  24,153
  25,236
  26,321
  27,416
  28,529
  29,666
  30,835
  32,044
  33,299
  34,608
  35,976
  37,410
  38,916
  40,501
  42,170
  43,929
  45,785
  47,742
  49,806
  51,985
  54,283
  56,708
  59,265
  61,961
  64,804
Issuance/(repurchase) of shares, $m
  1,140
  164
  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  
  19,818
  19,872
  20,848
  21,965
  23,065
  24,153
  25,236
  26,321
  27,416
  28,529
  29,666
  30,835
  32,044
  33,299
  34,608
  35,976
  37,410
  38,916
  40,501
  42,170
  43,929
  45,785
  47,742
  49,806
  51,985
  54,283
  56,708
  59,265
  61,961
  64,804
Total cash flow (excl. dividends), $m
  31,472
  32,725
  34,911
  37,329
  39,817
  42,379
  45,017
  47,739
  50,549
  53,454
  53,351
  56,469
  59,704
  63,065
  66,560
  70,200
  73,993
  77,948
  82,077
  86,388
  90,894
  95,605
  100,533
  105,691
  111,090
  116,744
  122,668
  128,874
  135,379
  142,198
Retained Cash Flow (-), $m
  -7,748
  -8,286
  -8,766
  -9,235
  -9,698
  -10,155
  -10,610
  -11,067
  -11,527
  -11,995
  -12,473
  -12,965
  -13,473
  -14,001
  -14,551
  -15,126
  -15,729
  -16,363
  -17,029
  -17,731
  -18,470
  -19,250
  -20,073
  -20,941
  -21,857
  -22,824
  -23,843
  -24,918
  -26,052
  -27,247
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
  23,724
  24,439
  26,146
  28,094
  30,120
  32,223
  34,407
  36,672
  39,022
  41,459
  40,878
  43,504
  46,230
  49,064
  52,010
  55,074
  58,264
  61,586
  65,048
  68,658
  72,424
  76,355
  80,460
  84,749
  89,233
  93,921
  98,825
  103,956
  109,327
  114,951
Discount rate, %
  8.30
  8.72
  9.15
  9.61
  10.09
  10.59
  11.12
  11.68
  12.26
  12.88
  13.52
  14.20
  14.91
  15.65
  16.43
  17.26
  18.12
  19.02
  19.97
  20.97
  22.02
  23.12
  24.28
  25.49
  26.77
  28.11
  29.51
  30.99
  32.54
  34.16
PV of cash for distribution, $m
  21,906
  20,678
  20,106
  19,464
  18,627
  17,612
  16,445
  15,155
  13,778
  12,348
  10,132
  8,846
  7,594
  6,407
  5,308
  4,314
  3,436
  2,680
  2,044
  1,524
  1,108
  786
  542
  364
  237
  150
  92
  54
  31
  17
Current shareholders' claim on cash, %
  98.5
  98.4
  98.4
  98.4
  98.4
  98.4
  98.4
  98.4
  98.4
  98.4
  98.4
  98.4
  98.4
  98.4
  98.4
  98.4
  98.4
  98.4
  98.4
  98.4
  98.4
  98.4
  98.4
  98.4
  98.4
  98.4
  98.4
  98.4
  98.4
  98.4

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 Corporation (CVS)

Valuation Ratios
P/E Ratio 11.8
Price to Sales 0.4
Price to Book 1.7
Price to Tangible Book
Price to Cash Flow 6.2
Price to Free Cash Flow 8
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 $194579 million for the last fiscal year's total revenue generated by CVS Health Corporation. The default revenue input number comes from 0001 income statement of CVS Health Corporation. 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 13.4% 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 8.3%, whose default value for CVS is calculated based on our internal credit rating of CVS Health Corporation, 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 Corporation.
    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 94.8%.

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 5.4% for CVS Health Corporation.

Corporate tax rate of 27% is the nominal tax rate for CVS Health Corporation. 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 27.1%.

Life of production assets of 34.8 years is the average useful life of capital assets used in CVS Health Corporation 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 -1.7%. 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 - $58225 million for CVS Health Corporation - 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 1297.122 million for CVS Health Corporation 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 Corporation at the current share price and the inputted number of shares is $76.9 billion.

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