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CVS CEO Announces Retirement – What Should You Do?

Back in July and August, I wrote two separate articles about CVS telling you why it’s an enormous potential investment.

Today, I give an update on the company and answer – CVS CEO Announces Retirement – What Should You Do? 

You can read the full articles using the links above.

But if you don’t want to; here’s a quick recap of the them before we get to today’s article.

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From Article #1 Linked Above

1 More Reason To Buy CVS

Since the coronavirus pandemic hit the US in Mid-March telehealth visits to CVS locations increased 600%.

CVS offers these through its MinuteClinic locations in CVS pharmacies and Targets nationwide.

But telehealth isn’t just meeting with a doctor or pharmacist via a phone or video call…

Its also prescription deliveries too.

Since Mid-March CVS says prescription delivery is up more than 1,000%.

Telehealth and prescription deliveries helped CVS same store sales grow 8% in the 1st quarter of 2020 to $67 billion.

These also increased its net income 41% to $2 billion in the 1st quarter of 2020 compared to $1.4 billion in the 1st quarter of 2019.

Why the huge 41% jump in net income compared to the 8% jump in sales?

Because these telehealth options mean lower expenses for CVS… Lower expenses with higher revenues lead to increased margins and huge jumps in profits and cash flows.

CVS is a stalwart company with solid growth over the last decade… This growth will continue going forward with its huge success in the telehealth arena as well.

The company is profitable and produces a ton of free cash flow… $11.7 billion in free cash flow production in the last 12 months alone.  And it pays a solid 3.2% dividend.

Plus, its undervalued too.

As of this writing its selling at a P/CF of only 9.4 compared to Teledoc’s huge 445 P/CF ratio.

CVS is a healthy, safe, and undervalued investment that is far less risky than TDOC… While also having the ability to benefit from the new trend in telehealth.

This trend of using technology more in medicine was already coming… But now its accelerating due to the ongoing coronavirus pandemic.

If you’re looking to buy a telehealth stock… You may as well buy the best.  And CVS right now looks like the best one to me.

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From Article #2 Linked Above

This was proved out further on August 5th, 2020 when CVS released its 2nd quarter 2020 earnings that were fantastic.

Revenue was up 3% to $65.3 billion in the 2nd quarter of 2020 compared to the 2nd quarter of 2019 when it was $63.3 billion.

Net income was up 36.7% to almost $3 billion in the 2nd quarter of 2020 compared to $1.9 billion in the 2nd quarter of 2019.

And CVS boosted its full year 2020 outlook due to these stellar results.

But why?

Because more people are using CVS’ telehealth option and getting their medications delivered to their home during this pandemic.

This helps the leader in this arena the most and that’s CVS.

Another reason its net income rose so much was due to lower costs related to it Aetna health insurance subsidiary.

Fewer people are doing elective surgeries right now because they either can’t due to city and state restrictions. Or they don’t want to be in the hospital unless they must so they can protect themselves and their families from potentially being around people with Covid.

And these impressive results were achieved while most other companies are Earth are getting hammered.

CVS will continue to not only survive but thrive during this pandemic and after due to its unique competitive advantages.

For these reasons and the ones in the previous article we recommend you buy CVS stock for the long term.

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This thesis to consider buying CVS stock for your retirement portfolio continued to play out after it released its most up to date quarterly earnings on November 6th, 2020.

Total revenues rose 3.5% on the year-to-year quarterly basis to $67.1 billion.

For the first nine months of 2020 revenues rose 4.9% to $199.2 billion compared to the same period last year.

Operating income in the first nine months of 2020 rose 26.8% to $11.4 billion compared to the same period last year.

And diluted earnings per share rose 25.9% to $4.72 per share in the first nine months of 2020 compared to the same period last year.

This is all fantastic of course and led to its share price rising from $64.97 back in July when I first recommended you buy it, to $73.63 per share today.

Or an increase of 13.3% in 5 months.

But because profits are rising faster than its share price its even more undervalued now than it was when I wrote either of the past two articles on the company.

As of this writing its P/E is 12.2.

Its P/CF is 6.5.

And its forward P/E is 9.8.

This continued undervaluation combined with improving revenues and profits make this an even safer better investment now.

Plus, also on November 6th CVS announced that its decade long CEO and President is retiring from the company effective February 1st, 2021.

He’ll be replaced by Karen S. Lynch who was the former Executive Vice President of CVS Health and President of CVS’ Aetna insurance group.

Ms. Lynch has a wealth of experience with both CVS and in the industry so this should be a relatively easy and stable transition to the next generation of leadership.

Both things are great for CVS and you as potential shareholders.  And because of them I continue to recommend you buy its stock for your retirement portfolio.

Use the following links to some of our recent articles to learn other ways to protect yourself and your investments in these uncertain times. 

Disclosure – Jason Rivera is a 13+ year veteran value investor who now spends much of his time helping other investors earn higher than average investment returns safely. He does not have any holdings in any securities mentioned above and the article expresses his own opinions. He has no business relationship with any company mentioned above

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