Stock Analysis on Net
Stock Analysis on Net

CVS Health Corp. (NYSE:CVS)

This company has been moved to the archive! The financial data has not been updated since May 1, 2025.

Present Value of Free Cash Flow to Equity (FCFE) 

Microsoft Excel

In discounted cash flow (DCF) valuation techniques the value of the stock is estimated based upon present value of some measure of cash flow. Free cash flow to equity (FCFE) is generally described as cash flows available to the equity holder after payments to debt holders and after allowing for expenditures to maintain the company asset base.

Intrinsic Stock Value (Valuation Summary)

CVS Health Corp., free cash flow to equity (FCFE) forecast

US$ in millions, except per share data

Microsoft Excel
Year Value FCFEt or Terminal value (TVt) Calculation Present value at 10.73%
01 FCFE0 11,385
1 FCFE1 11,893 = 11,385 × (1 + 4.46%) 10,740
2 FCFE2 12,232 = 11,893 × (1 + 2.85%) 9,976
3 FCFE3 12,385 = 12,232 × (1 + 1.25%) 9,121
4 FCFE4 12,340 = 12,385 × (1 + -0.36%) 8,207
5 FCFE5 12,097 = 12,340 × (1 + -1.97%) 7,265
5 Terminal value (TV5) 93,350 = 12,097 × (1 + -1.97%) ÷ (10.73% – -1.97%) 56,065
Intrinsic value of CVS Health Corp. common stock 101,373
 
Intrinsic value of CVS Health Corp. common stock (per share) $80.14
Current share price $69.45

Based on: 10-K (reporting date: 2024-12-31).

1 See details »

Disclaimer!
Valuation is based on standard assumptions. There may exist specific factors relevant to stock value and omitted here. In such a case, the real stock value may differ significantly form the estimated. If you want to use the estimated intrinsic stock value in investment decision making process, do so at your own risk.

Required Rate of Return (r)

Microsoft Excel
Assumptions
Rate of return on LT Treasury Composite1 RF 4.86%
Expected rate of return on market portfolio2 E(RM) 14.66%
Systematic risk of CVS Health Corp. common stock βCVS 0.60
 
Required rate of return on CVS Health Corp. common stock3 rCVS 10.73%

1 Unweighted average of bid yields on all outstanding fixed-coupon U.S. Treasury bonds neither due or callable in less than 10 years (risk-free rate of return proxy).

2 See details »

3 rCVS = RF + βCVS [E(RM) – RF]
= 4.86% + 0.60 [14.66% – 4.86%]
= 10.73%

FCFE Growth Rate (g)

FCFE growth rate (g) implied by PRAT model

CVS Health Corp., PRAT model

Microsoft Excel
Average Dec 31, 2024 Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 Dec 31, 2020
Selected Financial Data (US$ in millions)
Common stock dividends 3,381 3,138 2,910 2,644 2,644
Net income attributable to CVS Health 4,614 8,344 4,149 7,910 7,179
Revenues from customers 370,656 356,623 321,629 290,912 267,908
Total assets 253,215 249,728 228,275 232,999 230,715
Total CVS Health shareholders’ equity 75,560 76,461 71,015 75,075 69,389
Financial Ratios
Retention rate1 0.27 0.62 0.30 0.67 0.63
Profit margin2 1.24% 2.34% 1.29% 2.72% 2.68%
Asset turnover3 1.46 1.43 1.41 1.25 1.16
Financial leverage4 3.35 3.27 3.21 3.10 3.32
Averages
Retention rate 0.50
Profit margin 2.05%
Asset turnover 1.34
Financial leverage 3.25
 
FCFE growth rate (g)5 4.46%

Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).

2024 Calculations

1 Retention rate = (Net income attributable to CVS Health – Common stock dividends) ÷ Net income attributable to CVS Health
= (4,614 – 3,381) ÷ 4,614
= 0.27

2 Profit margin = 100 × Net income attributable to CVS Health ÷ Revenues from customers
= 100 × 4,614 ÷ 370,656
= 1.24%

3 Asset turnover = Revenues from customers ÷ Total assets
= 370,656 ÷ 253,215
= 1.46

4 Financial leverage = Total assets ÷ Total CVS Health shareholders’ equity
= 253,215 ÷ 75,560
= 3.35

5 g = Retention rate × Profit margin × Asset turnover × Financial leverage
= 0.50 × 2.05% × 1.34 × 3.25
= 4.46%

FCFE growth rate (g) implied by single-stage model

g = 100 × (Equity market value0 × r – FCFE0) ÷ (Equity market value0 + FCFE0)
= 100 × (87,856 × 10.73% – 11,385) ÷ (87,856 + 11,385)
= -1.97%

where:
Equity market value0 = current market value of CVS Health Corp. common stock (US$ in millions)
FCFE0 = the last year CVS Health Corp. free cash flow to equity (US$ in millions)
r = required rate of return on CVS Health Corp. common stock

FCFE growth rate (g) forecast

CVS Health Corp., H-model

Microsoft Excel
Year Value gt
1 g1 4.46%
2 g2 2.85%
3 g3 1.25%
4 g4 -0.36%
5 and thereafter g5 -1.97%

where:
g1 is implied by PRAT model
g5 is implied by single-stage model
g2, g3 and g4 are calculated using linear interpolation between g1 and g5

Calculations

g2 = g1 + (g5 – g1) × (2 – 1) ÷ (5 – 1)
= 4.46% + (-1.97% – 4.46%) × (2 – 1) ÷ (5 – 1)
= 2.85%

g3 = g1 + (g5 – g1) × (3 – 1) ÷ (5 – 1)
= 4.46% + (-1.97% – 4.46%) × (3 – 1) ÷ (5 – 1)
= 1.25%

g4 = g1 + (g5 – g1) × (4 – 1) ÷ (5 – 1)
= 4.46% + (-1.97% – 4.46%) × (4 – 1) ÷ (5 – 1)
= -0.36%