Is CVS Health (CVS) Making Money?

CVS Health (CVS) is a strange hybrid of a corporation that combines a major retailer with a health insurance company.

The CVS Health Corporation (NYSE: CVS) operates over 9,900 drugstores in Puerto Rico and 49 US states. Oberlo estimates that CVS Health was America’s eighth largest retailer in 2021.

Additionally, CVS claims over 50 million people visit its MinuteClinics. Plus, CVS claims its pharmacies fill 2.5 billion prescriptions a year. Additionally, CVS estimates five million patients use its Omnicare long-care services.

CVS owns Aetna, America’s third-largest health insurance company. Aetna had 22.1 million policyholders in 2021, Statista estimates.

Investors will wonder if CVS’s hybrid business can work? After all, insurance, clinics, and drugstores are unique businesses. Those business requires different skill sets and resources.

Skeptics will wonder if CVS could be as great a failure as Sears Holdings, hedge-fund tycoon Eddie Lampert’s disastrous combination of Sears and Kmart. Sears Holdings collapsed because there was no synergy between the two companies.  

CVS Health Makes Money

Financial data shows CVS Health’s weird business model is working. For instance, CVS Health (CVS) reported $80.636 billion in quarterly revenues on 30 June 2022.

The quarterly revenues grew from $69.097 billion on 31 March 2021. Stockrow estimates CVS’s revenues grew by 11.06% in the quarter ending on 30 June 2022.

CVS is making money. It reported a quarterly gross profit of $31.346 billion on 30 June 2022. The quarterly gross profit grew from $12.499 billion on 31 March 2021 and $13.366 billion on 31 March 2022.

Additionally, CVS has more money. The quarterly operating income fell from $3.577 billion on 31 March 2021 to $3.49 billion on 31 March 2022 and rose to $4.569 billion on 30 June 2022.

How Much Money is the CVS Health Corporation Making?

CVS (CVS) can generate cash. For instance, CVS reported a quarterly cash operating flow of $5.443 billion on 30 June 2022. The quarterly operating cash flow rose from $2.892 billion on 31 March 2021 and $3.563 billion on 31 March 2022 and fell from $5.847 billion on 30 June 2021.

Similarly, CVS’s quarterly ending cash flow rose from $8.883 billion on 31 March 2021 to $11.622 billion on 31 March 2022. Thus, CVS can generate enormous amounts of cash. Yet the quarterly ending cash flow fell to $852 million on 30 June 2022.

CVS Health can keep that cash. The cash and short-term investments rose from $8.788 billion on 31 March 2021 to $15.59 billion on 31 December 2021 and fell to $14.255 billion on 31 March 2022. The cash and short-term investments rose to $14.993 billion on 30 June 2022.

What Value does CVS Health (CVS) offer?

CVS Health (CVS) offers enormous value. It had $232.873 billion in total assets on 31 March 2022 and $230.279 billion in total assets on 30 June 2022.

However, that value could be shrinking. The total assets fell from $240.496 billion on 31 December 2021. Conversely, the total assets shrank from $229.606 billion on 31 March 2021.

Appealingly, CVS has less debt. The Total debt fell from $82.317 billion on 31 March 2021 to  $75.915 billion on 31 March 2022 to $54.816 billion on 30 June 2022. CVS is paying enormous amounts of debt. It reported quarterly financing cash flows of -$2.650 billion on 31 March 2022 and -$2.461 billion on 30 June 2022.

Is CVS Health (CVS) a Value Investment?

So, yes on paper, CVS Health (NYSE: CVS) offers enormous value. Consequently, some people will think CVS Health is a value investment because of its stock price.

Mr. Market paid $102.26 for CVS shares on 5August 2022. That share price rose from $84 on 3 August 2021 and fell from $110.83 on 8 February 2022.

Hence, CVS is a cheaper company with a growing stock price. Additionally, CVS Health is a cash-rich company that makes money.

Plus, CVS is an attractive dividend stock. CVS Health has scheduled eight 55₵ quarterly dividends through 1 August 2024. CVS shares offered a $2.20 forward dividend and a 2.15% dividend yield on 5 August 2022.

Why CVS Health is a Value Investment

I consider CVS Health (CVS) a value investment. Appealingly, CVS is a value company that operates in a growing business.

Healthcare compromised 19.7% of America’s gross domestic product (GDP) in 2020, the Centers for Medicare & Medicaid Services (CMS) estimates. The CMS estimates US healthcare spending grew by 9.7% in 2020. The United States spent $4.1 trillion or $12,530 a person on healthcare in 2020.

More importantly, healthcare is a business financed by tax money. The Kaiser Family Foundation estimates Median Medicaid enrollment and spending will by grow by 14% in 2023.

The Congressional Budget Office (CBO) projects the federal government will spend $768 billion on Medicare, $589 billion on Medicaid, $89 billion on health insurance premium tax cuts, and $17 billion on the Children’s Health Insurance Program (CHIP) in 2022.  

Why the Government Supports CVS Health

Overall, the CBO projects the federal government will spend $997 billion on health insurance for people over 65 in 2022. Moreover, federal spending on healthcare is rising. The CBO projects that federal health insurance spending for people over 65 will rise to $1.6 trillion by 2032 without National Health Insurance.

Importantly, the federal government will not run out of money. Remember, Congress can always raise taxes, print money, or borrow money to pay for healthcare.

The possibility of Medicare running out of money is remote because Congresspeople want to keep their jobs. I think politicians will always find the money to keep Medicare running.

Thus, CVS Health could be a great value investment because it is a growing business the government has to support. If you are seeking a safe value and dividend stock, I think CVS is worth examining.