CVS Health (CVS): Reassessing Valuation After Insulin Settlement and Generative AI Healthcare Push

CVS Health (CVS) is back in the spotlight after agreeing to pay nearly $38 million to resolve a decade long insulin pen billing case, even as it leans into generative AI driven care initiatives.

See our latest analysis for CVS Health.

Despite headline risk from the insulin settlement, CVS Health’s share price has climbed sharply this year, with a year to date share price return of 73.56 percent. The 1 year total shareholder return of 40.75 percent signals improving sentiment after a weak three year stretch.

If this mix of legal clean up and AI driven healthcare has your attention, it could be a good moment to explore other established healthcare stocks that might be quietly setting up their next leg of growth.

With shares up sharply yet still trading below analyst targets and some models implying a steeper intrinsic discount, is CVS Health being underestimated after its clean up efforts and AI push, or is the market already factoring in the next wave of growth?

Most Popular Narrative Narrative: 16.1% Undervalued

Compared to CVS Health’s last close of $76.75, the most followed narrative pegs fair value materially higher, framing today’s rally as only a partial catch up.

Integration of recent and ongoing acquisitions (such as Aetna, Oak Street, and Signify Health) and vertical alignment between insurance, pharmacy, and care delivery provide substantial cross-selling and synergy opportunities, supporting long-term operating margin and earnings growth as margin recovery initiatives gain traction.

Read the complete narrative.

Want to see the math behind this higher valuation lens? It rests on steadily rising revenues, fatter margins, and a future earnings multiple that might surprise you.

Result: Fair Value of $91.48 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, persistent Medicare Advantage margin pressure and structurally weak front store traffic could stall earnings momentum and challenge the undervalued thesis that investors are leaning on.

Find out about the key risks to this CVS Health narrative.

Build Your Own CVS Health Narrative

If you see the story differently or want to stress test the numbers yourself, you can build a personalized view in just minutes: Do it your way

A great starting point for your CVS Health research is our analysis highlighting 3 key rewards and 4 important warning signs that could impact your investment decision.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.