Buy Or Fear CVS Stock At $78?

Core Insights - CVS Health's latest results indicate stable sales and adjusted profits, with upward adjustments to forecasts, but the stock is considered "cheap but risky" due to profit quality and high debt levels [2][15]. Financial Performance - In Q3 2025, CVS reported revenue of approximately $103 billion, an 8% increase year-over-year, with all segments contributing to growth [3]. - The adjusted EPS was around $1.60, a significant rise from the previous year, leading management to increase the full-year 2025 adjusted EPS forecast to the mid-$6 range [5]. - A $5.7 billion charge related to the Health Care Delivery segment resulted in a net loss for the quarter, affecting reported profit figures [4]. Valuation Metrics - CVS trades at a low Price-to-Sales (P/S) ratio of about 0.2x compared to roughly 3x for the S&P 500, indicating undervaluation [12]. - The Price-to-Earnings (P/E) ratio is over 200x, primarily due to one-time charges, but falls into low double digits when based on future projections or adjusted earnings [8][9]. Profitability and Debt Concerns - CVS has managed annual sales growth of about 7-8% over the past three years, slightly better than the S&P 500 average, but profitability is currently weak with low operating profit margins [10][13]. - The company's total debt is in the low $80 billion range, with a debt-to-equity ratio in the mid-80% range, indicating a high level of debt compared to market value [13][11]. Investment Suitability - The stock is deemed suitable for investors willing to take risks, as it is undervalued but has weak overall financial health due to high debt and low profit margins [15][16]. - CVS is not considered a safe investment, having experienced significant declines during market corrections in the past [14][17].