CVS Health: Is It A Bargain Or A Risk?

CVS Health’s (NYSE: CVS) latest results confirm a few things: their sales and adjusted profits are stable, and they are raising their forecasts. However, the quality of their profits and their high debt still make the stock a “cheap but risky” choice, not a clear-cut bargain.

In the third quarter of 2025, revenue reached about $103 billion, an increase of 8% from last year. All parts of the company contributed to this growth. CVS beat what experts expected for both sales and adjusted profit per share (adjusted EPS). This continues a long-term trend of sales growth in the mid-to-high single-digits (around 7–8% per year).

The reported profit numbers looked bad because of a $5.7 billion charge related to their Health Care Delivery business. This big, one-time write-down caused the company to report a net loss for the quarter.

However, if you look past that charge, the adjusted EPS was about $1.60, a strong jump from the previous year. Management is now more confident, raising the full-year 2025 adjusted EPS forecast into the mid-$6 range and slightly increasing its operating cash flow outlook.

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Is the Stock Really “Cheap”?

Is CVS cheap compared to the S&P 500 index? Generally, yes. The stock looks cheap when comparing its price to sales (P/S) and price to cash flow (P/FCF).

• Price-to-Sales (P/S): CVS trades at a very low P/S ratio of about 0.2x, compared to roughly 3x for the S&P 500. This is because CVS operates on high sales volume but with very small profit margins.
• Price-to-Free Cash Flow (P/FCF): CVS is in the mid-teens, which is lower than the S&P 500’s low-20s level. This supports the idea that the stock is discounted compared to the general market.

Why does the standard Price-to-Earnings (P/E) look so high? The P/E ratio is currently quoted as being over 200x, which seems outrageously high. But, this is misleading. It’s only high because of the recent one-off charges, like the $5.7 billion write-down, which have temporarily crushed the official (GAAP) earnings.

If you look at the P/E based on future forecasts or the adjusted earnings, the ratio is much more reasonable, landing in the low double-digits. This is again below the S&P 500, confirming the stock is cheap based on its normal, ongoing profits.

Look at our dashboard on CVS Health Valuation Ratios for more details.

The Quality Problem: Weak Profitability and High Debt

Is the growth strong enough to own the stock? Growth is good, but profit quality is not—for now. CVS has grown sales at about 7–8% annually for the last three years, which is slightly better than the average stock in the S&P 500. Also, sales are slowly shifting toward more profitable health services and insurance.

What is the main problem with profitability? This is the biggest issue.

• Over the last year, the company’s operating profit margin (profit before interest/taxes) and cash flow margin have both been only in the low single digits (e.g., 1% or 2%).
• After all charges and costs, the net profit margin has been close to zero.
• This is much worse than the S&P 500, which typically sees operating margins in the high teens. CVS is cheap because investors are worried about its low structural profits and frequent one-time costs from its strategy of buying healthcare providers.

Does CVS have too much debt? The amount of debt is high but manageable.

• Total debt is in the low $80-billion range, which is a large amount compared to its market value (just under $100 billion).
• Its debt-to-equity ratio is in the mid-80% area, which is much higher than the broader market.
• The company’s cash cushion is also relatively small, confirming the view that the balance sheet is weak, even if they can still afford the interest payments.

How does CVS stock behave when the market has a correction? CVS is not a safe, defensive stock. Historically, it has seen sharp drops (in the 30–45% range) during major downturns like the financial crisis and the 2022 inflation shock. It always recovers, but often takes a long time. This shows that the combination of high debt and thin profit margins makes the stock more sensitive to unexpected economic or company issues.

The Final Verdict

If the valuation is low and growth is decent, why is the profile still called “weak”? The overall profile is weak because of the combination of factors:

• Moderate Growth: Sales growth is slightly above the market average.
• Poor Profitability: Current profits are very weak due to one-off costs, and the promised improvement depends entirely on successful execution.
• High Debt: The balance sheet is stretched, leaving little room for mistakes.
• High Volatility: The stock often underperforms during major market sell-offs.

Is CVS a buy now? Yes, but only for certain investors. The stock is clearly discounted on all common valuation metrics. If management can keep sales growing, improve the weak profit margins even a little, and slowly reduce debt, there is a chance for the stock price to increase significantly.

Therefore, CVS is a good stock to buy only for investors who are comfortable taking a risk on the company turning itself around—it is not for those seeking a safe, stable investment. Also, investing in a single stock without comprehensive analysis can be risky. Consider the Trefis Reinforced Value (RV) Portfolio, which has outperformed its all-cap stocks benchmark (combination of the S&P 500, S&P mid-cap, and Russell 2000 benchmark indices) to produce strong returns for investors. Why is that? The quarterly rebalanced mix of large-, mid-, and small-cap RV Portfolio stocks provided a responsive way to make the most of upbeat market conditions while limiting losses when markets head south, as detailed in RV Portfolio performance metrics.