Intrinsic value of CVS Health - CVS

Previous Close

$73.68

  Intrinsic Value

$120.89

stock screener

  Rating & Target

str. buy

+64%

Previous close

$73.68

 
Intrinsic value

$120.89

 
Up/down potential

+64%

 
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 2017), $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 75.2

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   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
   2047

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  4.10
  4.19
  4.27
  4.34
  4.41
  4.47
  4.52
  4.57
  4.61
  4.65
  4.69
  4.72
  4.75
  4.77
  4.79
  4.81
  4.83
  4.85
  4.86
  4.88
  4.89
  4.90
  4.91
  4.92
  4.93
  4.94
  4.94
  4.95
  4.95
  4.96
Revenue, $m
  192,340
  200,399
  208,958
  218,035
  227,650
  237,822
  248,576
  259,935
  271,924
  284,573
  297,908
  311,962
  326,767
  342,358
  358,771
  376,045
  394,220
  413,339
  433,448
  454,593
  476,826
  500,197
  524,764
  550,584
  577,717
  606,230
  636,189
  667,666
  700,734
  735,474
Variable operating expenses, $m
  180,971
  188,336
  196,157
  204,452
  213,237
  222,533
  232,360
  242,740
  253,696
  265,254
  272,232
  285,075
  298,604
  312,851
  327,850
  343,634
  360,243
  377,715
  396,090
  415,413
  435,729
  457,086
  479,536
  503,130
  527,925
  553,980
  581,357
  610,121
  640,340
  672,085
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
  180,971
  188,336
  196,157
  204,452
  213,237
  222,533
  232,360
  242,740
  253,696
  265,254
  272,232
  285,075
  298,604
  312,851
  327,850
  343,634
  360,243
  377,715
  396,090
  415,413
  435,729
  457,086
  479,536
  503,130
  527,925
  553,980
  581,357
  610,121
  640,340
  672,085
Operating income, $m
  11,369
  12,064
  12,802
  13,584
  14,413
  15,289
  16,216
  17,195
  18,228
  19,319
  25,676
  26,887
  28,163
  29,507
  30,922
  32,410
  33,977
  35,625
  37,358
  39,180
  41,097
  43,111
  45,228
  47,454
  49,792
  52,250
  54,832
  57,545
  60,395
  63,389
EBITDA, $m
  23,040
  24,005
  25,031
  26,118
  27,270
  28,488
  29,776
  31,137
  32,573
  34,088
  35,686
  37,369
  39,143
  41,010
  42,976
  45,046
  47,223
  49,513
  51,922
  54,455
  57,118
  59,917
  62,860
  65,953
  69,203
  72,619
  76,208
  79,978
  83,939
  88,101
Interest expense (income), $m
  -1,140
  1,458
  1,587
  1,722
  1,866
  2,018
  2,180
  2,351
  2,531
  2,722
  2,924
  3,136
  3,360
  3,596
  3,845
  4,106
  4,382
  4,672
  4,978
  5,299
  5,636
  5,991
  6,365
  6,757
  7,170
  7,604
  8,059
  8,538
  9,041
  9,570
  10,125
Earnings before tax, $m
  9,911
  10,477
  11,079
  11,718
  12,394
  13,109
  13,865
  14,664
  15,506
  16,395
  22,540
  23,527
  24,567
  25,662
  26,815
  28,028
  29,305
  30,647
  32,059
  33,544
  35,105
  36,746
  38,471
  40,284
  42,188
  44,190
  46,293
  48,503
  50,825
  53,263
Tax expense, $m
  2,676
  2,829
  2,991
  3,164
  3,346
  3,540
  3,744
  3,959
  4,187
  4,427
  6,086
  6,352
  6,633
  6,929
  7,240
  7,568
  7,912
  8,275
  8,656
  9,057
  9,478
  9,921
  10,387
  10,877
  11,391
  11,931
  12,499
  13,096
  13,723
  14,381
Net income, $m
  7,235
  7,648
  8,088
  8,554
  9,048
  9,570
  10,122
  10,704
  11,320
  11,968
  16,454
  17,175
  17,934
  18,734
  19,575
  20,461
  21,392
  22,372
  23,403
  24,487
  25,627
  26,825
  28,084
  29,407
  30,798
  32,259
  33,794
  35,407
  37,102
  38,882

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
  99,042
  103,192
  107,600
  112,274
  117,224
  122,463
  128,000
  133,849
  140,023
  146,536
  153,403
  160,640
  168,263
  176,292
  184,743
  193,638
  202,997
  212,842
  223,197
  234,085
  245,533
  257,568
  270,218
  283,514
  297,486
  312,168
  327,595
  343,803
  360,831
  378,720
Adjusted assets (=assets-cash), $m
  99,042
  103,192
  107,600
  112,274
  117,224
  122,463
  128,000
  133,849
  140,023
  146,536
  153,403
  160,640
  168,263
  176,292
  184,743
  193,638
  202,997
  212,842
  223,197
  234,085
  245,533
  257,568
  270,218
  283,514
  297,486
  312,168
  327,595
  343,803
  360,831
  378,720
Revenue / Adjusted assets
  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
  64,626
  67,334
  70,210
  73,260
  76,490
  79,908
  83,522
  87,338
  91,367
  95,616
  100,097
  104,819
  109,794
  115,032
  120,547
  126,351
  132,458
  138,882
  145,639
  152,743
  160,213
  168,066
  176,321
  184,996
  194,113
  203,693
  213,760
  224,336
  235,447
  247,119
Working capital, $m
  -4,039
  -4,208
  -4,388
  -4,579
  -4,781
  -4,994
  -5,220
  -5,459
  -5,710
  -5,976
  -6,256
  -6,551
  -6,862
  -7,190
  -7,534
  -7,897
  -8,279
  -8,680
  -9,102
  -9,546
  -10,013
  -10,504
  -11,020
  -11,562
  -12,132
  -12,731
  -13,360
  -14,021
  -14,715
  -15,445
Total debt, $m
  29,388
  31,894
  34,556
  37,379
  40,370
  43,533
  46,878
  50,411
  54,140
  58,074
  62,221
  66,592
  71,197
  76,046
  81,151
  86,523
  92,176
  98,123
  104,377
  110,953
  117,868
  125,137
  132,778
  140,808
  149,247
  158,115
  167,433
  177,223
  187,508
  198,313
Total liabilities, $m
  59,822
  62,328
  64,990
  67,813
  70,804
  73,967
  77,312
  80,845
  84,574
  88,508
  92,655
  97,026
  101,631
  106,480
  111,585
  116,957
  122,610
  128,557
  134,811
  141,387
  148,302
  155,571
  163,212
  171,242
  179,681
  188,549
  197,867
  207,657
  217,942
  228,747
Total equity, $m
  39,221
  40,864
  42,609
  44,460
  46,421
  48,495
  50,688
  53,004
  55,449
  58,028
  60,747
  63,613
  66,632
  69,811
  73,158
  76,681
  80,387
  84,285
  88,386
  92,698
  97,231
  101,997
  107,006
  112,271
  117,804
  123,618
  129,728
  136,146
  142,889
  149,973
Total liabilities and equity, $m
  99,043
  103,192
  107,599
  112,273
  117,225
  122,462
  128,000
  133,849
  140,023
  146,536
  153,402
  160,639
  168,263
  176,291
  184,743
  193,638
  202,997
  212,842
  223,197
  234,085
  245,533
  257,568
  270,218
  283,513
  297,485
  312,167
  327,595
  343,803
  360,831
  378,720
Debt-to-equity ratio
  0.750
  0.780
  0.810
  0.840
  0.870
  0.900
  0.920
  0.950
  0.980
  1.000
  1.020
  1.050
  1.070
  1.090
  1.110
  1.130
  1.150
  1.160
  1.180
  1.200
  1.210
  1.230
  1.240
  1.250
  1.270
  1.280
  1.290
  1.300
  1.310
  1.320
Adjusted equity ratio
  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
  7,235
  7,648
  8,088
  8,554
  9,048
  9,570
  10,122
  10,704
  11,320
  11,968
  16,454
  17,175
  17,934
  18,734
  19,575
  20,461
  21,392
  22,372
  23,403
  24,487
  25,627
  26,825
  28,084
  29,407
  30,798
  32,259
  33,794
  35,407
  37,102
  38,882
Depreciation, amort., depletion, $m
  11,671
  11,942
  12,229
  12,534
  12,857
  13,199
  13,560
  13,942
  14,345
  14,770
  10,010
  10,482
  10,979
  11,503
  12,055
  12,635
  13,246
  13,888
  14,564
  15,274
  16,021
  16,807
  17,632
  18,500
  19,411
  20,369
  21,376
  22,434
  23,545
  24,712
Funds from operations, $m
  18,906
  19,590
  20,317
  21,088
  21,905
  22,769
  23,682
  24,646
  25,664
  26,738
  26,464
  27,657
  28,914
  30,237
  31,630
  33,096
  34,638
  36,261
  37,967
  39,761
  41,648
  43,631
  45,716
  47,907
  50,209
  52,628
  55,170
  57,841
  60,647
  63,594
Change in working capital, $m
  -159
  -169
  -180
  -191
  -202
  -214
  -226
  -239
  -252
  -266
  -280
  -295
  -311
  -327
  -345
  -363
  -382
  -402
  -422
  -444
  -467
  -491
  -516
  -542
  -570
  -599
  -629
  -661
  -694
  -730
Cash from operations, $m
  19,065
  19,759
  20,497
  21,279
  22,107
  22,982
  23,908
  24,885
  25,916
  27,004
  26,744
  27,952
  29,224
  30,564
  31,974
  33,459
  35,020
  36,662
  38,389
  40,206
  42,115
  44,122
  46,232
  48,449
  50,779
  53,227
  55,799
  58,502
  61,341
  64,324
Maintenance CAPEX, $m
  -6,215
  -6,463
  -6,733
  -7,021
  -7,326
  -7,649
  -7,991
  -8,352
  -8,734
  -9,137
  -9,562
  -10,010
  -10,482
  -10,979
  -11,503
  -12,055
  -12,635
  -13,246
  -13,888
  -14,564
  -15,274
  -16,021
  -16,807
  -17,632
  -18,500
  -19,411
  -20,369
  -21,376
  -22,434
  -23,545
New CAPEX, $m
  -2,472
  -2,708
  -2,876
  -3,050
  -3,230
  -3,418
  -3,613
  -3,817
  -4,029
  -4,250
  -4,481
  -4,722
  -4,975
  -5,239
  -5,515
  -5,804
  -6,107
  -6,424
  -6,756
  -7,105
  -7,470
  -7,853
  -8,254
  -8,675
  -9,117
  -9,580
  -10,066
  -10,576
  -11,111
  -11,673
Cash from investing activities, $m
  -8,687
  -9,171
  -9,609
  -10,071
  -10,556
  -11,067
  -11,604
  -12,169
  -12,763
  -13,387
  -14,043
  -14,732
  -15,457
  -16,218
  -17,018
  -17,859
  -18,742
  -19,670
  -20,644
  -21,669
  -22,744
  -23,874
  -25,061
  -26,307
  -27,617
  -28,991
  -30,435
  -31,952
  -33,545
  -35,218
Free cash flow, $m
  10,377
  10,588
  10,887
  11,208
  11,550
  11,915
  12,304
  12,716
  13,154
  13,617
  12,702
  13,220
  13,768
  14,346
  14,956
  15,600
  16,278
  16,992
  17,745
  18,537
  19,371
  20,248
  21,171
  22,141
  23,162
  24,235
  25,364
  26,550
  27,796
  29,107
Issuance/(repayment) of debt, $m
  2,386
  2,507
  2,662
  2,823
  2,990
  3,164
  3,345
  3,533
  3,729
  3,934
  4,148
  4,371
  4,605
  4,849
  5,105
  5,372
  5,653
  5,946
  6,254
  6,577
  6,915
  7,269
  7,641
  8,030
  8,439
  8,868
  9,318
  9,790
  10,285
  10,805
Issuance/(repurchase) of shares, $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 from financing (excl. dividends), $m  
  2,386
  2,507
  2,662
  2,823
  2,990
  3,164
  3,345
  3,533
  3,729
  3,934
  4,148
  4,371
  4,605
  4,849
  5,105
  5,372
  5,653
  5,946
  6,254
  6,577
  6,915
  7,269
  7,641
  8,030
  8,439
  8,868
  9,318
  9,790
  10,285
  10,805
Total cash flow (excl. dividends), $m
  12,763
  13,095
  13,549
  14,031
  14,541
  15,079
  15,648
  16,249
  16,883
  17,551
  16,849
  17,591
  18,373
  19,195
  20,061
  20,972
  21,931
  22,939
  23,999
  25,113
  26,285
  27,517
  28,811
  30,172
  31,601
  33,103
  34,682
  36,340
  38,081
  39,911
Retained Cash Flow (-), $m
  -1,526
  -1,643
  -1,745
  -1,851
  -1,960
  -2,074
  -2,193
  -2,316
  -2,445
  -2,579
  -2,719
  -2,866
  -3,019
  -3,179
  -3,347
  -3,522
  -3,706
  -3,899
  -4,100
  -4,312
  -4,533
  -4,766
  -5,009
  -5,265
  -5,533
  -5,814
  -6,109
  -6,418
  -6,743
  -7,084
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
  185
  192
  200
  209
  218
  228
  238
  249
  260
  272
  285
  298
  312
  327
  342
  359
  376
  394
  413
  433
  455
  477
  500
  525
  551
  578
  606
  636
  668
  701
Cash available for distribution, $m
  11,237
  11,452
  11,804
  12,180
  12,580
  13,005
  13,455
  13,933
  14,438
  14,972
  14,130
  14,725
  15,354
  16,016
  16,714
  17,450
  18,225
  19,040
  19,898
  20,802
  21,752
  22,751
  23,802
  24,907
  26,068
  27,289
  28,573
  29,921
  31,338
  32,827
Discount rate, %
  5.70
  5.99
  6.28
  6.60
  6.93
  7.27
  7.64
  8.02
  8.42
  8.84
  9.28
  9.75
  10.24
  10.75
  11.29
  11.85
  12.44
  13.06
  13.72
  14.40
  15.12
  15.88
  16.67
  17.51
  18.38
  19.30
  20.27
  21.28
  22.34
  23.46
PV of cash for distribution, $m
  10,631
  10,195
  9,832
  9,433
  8,999
  8,533
  8,038
  7,516
  6,974
  6,416
  5,321
  4,822
  4,325
  3,836
  3,361
  2,908
  2,482
  2,088
  1,730
  1,410
  1,130
  889
  686
  518
  384
  277
  196
  135
  90
  59
Current shareholders' claim on cash, %
  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 14.7
Price to Sales 0.4
Price to Book 2.1
Price to Tangible Book
Price to Cash Flow 7.8
Price to Free Cash Flow 10
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 2017 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 4.1% 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 5.7%, 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 0.1%.

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 33.6%.

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 -2.1%. 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 - $37695 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 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 $75.2 billion.

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