Key Points
CVS' end-to-end healthcare service improves efficiency.
The company steadily increases revenue every year.
The stock is trading for only 11 times earnings.
Shares of CVS Health(NYSE: CVS) have lagged the S&P 500 in total return this year, reinforcing a familiar narrative about the healthcare company: a mature, slow-growing grinder.
However, that view misses the bigger picture. The market is devoting too much attention to CVS Health's low-margin pharmacy business while overlooking its transformation into a fully integrated, diversified powerhouse, acting as a pharmacy benefits manager through CVS Caremark and a health insurance provider through Aetna.
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The stock is down more than 3% so far this year, and the market may be underpricing this evolution. Here are three reasons it is the ultimate value stock to buy now:
1. The stock is priced low, considering its growth
CVS trades at just under 11 times forward earnings. It has steadily grown revenue every year and is up 126.5% over the past 10 years. It reported a record $402.1 billion in 2025 sales, up 7.8%, while adjusted earnings per share (EPS) rose 24.5% to $6.75. Management is predicting adjusted EPS in 2026 of $7.00 to $7.20.
Image source: Getty Images.
The healthcare company operates three segments: healthcare benefits, health services, and pharmacy and consumer wellness. All three saw revenue rise at least 9%. Aetna's medical benefit ratio, after spiking in previous years, dropped to around 91%, indicating the company is pricing its Medicare Advantage plans more efficiently and managing costs more effectively.
With its 1,000 walk-in and primary-care clinics (including MinuteClinics and roughly 230 of its Oak Street centers designed for seniors), the company is driving higher medication adherence and lower hospital admission rates among its own insurance members. It is an internal efficiency that pure-play retailers or insurers cannot easily replicate.
2. Steady cash flow bolsters its dividend
CVS froze its dividend at $0.50 per share from 2017 to 2021 as it paid down debt following its $69 billion purchase of Aetna. However, it has never cut its dividend, and since 2022, it has increased it by 33%. The yield at the current share price is a healthy 3.46%; the payout ratio, at 43.5%, signals that the company can afford to increase its dividend.
The company continues to generate cash at a robust rate, allowing it to maintain its dividend while paying down debt. It reported $10.6 billion in cash flow from operations in 2025 and has forecast at least $9 billion in cash flow in 2026.
3. Medicare rate increase will help CVS
Initially, it was thought that the Centers for Medicare and Medicaid Services (CMS) would raise Medicare payment rates by only 0.9%. Instead, the rate increase was 2.48%, meaning the company's Aetna unit could see higher margins this year.
Management said it anticipates revenue of at least $400 billion this year, roughly flat from 2025, and an adjusted earnings compound annual growth rate in the mid-teens over the next three years.
Everyone loves a comeback story
CVS is in the midst of a multiyear rally. If it shows continued progress when it reports first-quarter earnings on May 6, it could again increase its dividend or even start a stock repurchase program. The company's dividend yield is more than twice that of the S&P 500, making it a great buy for value or income investors.
The closing of Rite Aid stores after that company's bankruptcy provides an opportunity for CVS and its more than 9,000 retail stores to increase market share.
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James Halley has positions in CVS Health. The Motley Fool recommends CVS Health. The Motley Fool has a disclosure policy.
