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CVS Health Trades at a Discount to Industry: How to Play the Stock?
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Key Takeaways
CVS Health's Aetna margin recovery and stronger pharmacy trends are supporting improved 2026 results.
CVS Pharmacy & Consumer Wellness income rose 10.2%, with prescriptions up 7% and margins improving.
340B pressure and declining Caremark membership could weigh on CVS Health's near-term results.
CVS Health (CVS - Free Report) looks attractively valued, as reflected in its Value Score of A. The company is currently trading at a forward, one-year price-to-earnings (P/E) of 10.29X, below its historical median of 11.17X and the 16.23 P/E of the Zacks Medical Services industry. The gap is even wider against the broader Medical sector, which sits with a 20.55X P/E.
CVS also trades at a discount compared with two of its closest peers, UnitedHealth Group (UNH - Free Report) and Elevance Health (ELV - Free Report) , which command P/E multiples of 17.15X and 13.99X, respectively.
CVS Health’s 12-month P/E
Image Source: Zacks Investment Research
The stock’s performance over the past year has been encouraging as well. CVS shares have risen 14.5% compared to the industry’s 9.6% return and the sector’s 3.2% rise. Yesterday, it closed at $87.95, up 1.8% from the previous session and nearly 26.5% above its 52-week low of $69.51. In comparison, UnitedHealth Group has gained 2.1%, while Elevance Health is up 12.8% over the same period.
CVS’ 12-Month Price Performance
Image Source: Zacks Investment Research
While valuation and stock performance offer an encouraging picture, it is equally important to examine the underlying business trends to strengthen the investment case. Here’s a closer look.
Key Factors Favoring CVS Health
Aetna’s Margin Recovery Gains Momentum: CVS Health is making headway in its plan to restore Aetna’s margins through pricing discipline, medical cost management and operational changes. Health Care Benefits adjusted operating income rose more than $2 billion year over year in the first half of 2026. The second-quarter medical benefit ratio fell to 87.4% from 89.9% a year earlier, while Medicare performance exceeded expectations.
CVS raised 2026 Health Care Benefits adjusted operating income outlook to $5.03-$5.37 billion, more than $1 billion above its previous guidance. Operational initiatives are also supporting this effort. Aetna’s AI-powered Claims Assist Manager is designed to reduce processing time by more than 20% for complex manually reviewed claims, while the Aetna Clinical Collaboration program is being expanded to strengthen provider and member coordination.
Strength in Pharmacy and Consumer Wellness: CVS’ Pharmacy & Consumer Wellness business is gaining from higher prescription volumes and improving pharmacy economics. Second-quarter 2026 adjusted operating income increased 10.2% year over year, while same-store prescription volume rose 7%. Higher utilization and Rite Aid file acquisitions supported the gains. Prescriptions filled increased 4.3% on a 30-day equivalent basis, while the segment’s gross margin improved to 19.3% from 17.9% a year earlier. These trends helped offset regulatory-related price reductions, generic drug introductions and continued reimbursement pressure.
Management raised its 2026 adjusted operating income outlook for the segment by $220 million to at least $6.4 billion. The company is also expanding access to GLP-1 therapies through its pharmacy network, MinuteClinic services and cash-pay options, which could support additional prescription volume and customer engagement.
Health Services Shows Solid Progress: CVS’ Health Services business is benefiting from pharmacy drug mix, brand inflation, purchasing economics and ongoing progress in Health Care Delivery. In the second quarter, adjusted operating income rose 10% year over year. Management reiterated its full-year adjusted operating income outlook despite an updated view of 340B. Caremark continues to adapt its model as clients seek lower net costs and greater transparency.
The 2026 selling season generated more than $6 billion of new sales, which management described as well above its historical average. CVS Specialty continues to maintain adherence above 90%, while Caremark’s Humira biosimilar strategy has delivered more than $1.8 billion in client savings. Management also expects a strong specialty generic pipeline in 2027.
Technical Indicators for CVS
Despite the progress in its businesses, CVS Health’s technical picture remains weak. The stock is trading below its 50-day and 90-day simple moving averages, pointing to weaker near-term momentum.
CVS’ 50- and 90-day SMA
Image Source: Zacks Investment Research
What’s Weighing on CVS?
CVS Health’s 340B business, part of its Pharmacy Services unit, faced some pressure in the second quarter as the program’s environment remained dynamic. Pharmaceutical manufacturers are imposing restrictions on covered entities, which contributed to the impact during the quarter. At the same time, the shift of large specialty drugs to generic versions is creating additional pressure. CVS expects 340B to remain a headwind going into next year.
Also, Caremark membership is expected to decline next year as CVS works through the transition to a lowest-net-cost pricing model and takes a more deliberate approach to client renewals and the selling season. Industry pressures on legacy contracts, along with product actions and market exits by some health-plan customers, are also expected to affect membership.
As shown below, the Zacks Consensus Estimate for earnings for CVS Health’s remaining 2026 quarters has seen mixed revisions over the past three months.
Image Source: Zacks Investment Research
Endnote
CVS obviously stands out for its favorable valuation, recent share price gains and improving performance across key businesses. Aetna’s margin recovery is gaining traction, while higher prescription volumes and improving pharmacy economics are supporting growth in Pharmacy and Consumer Wellness. Health Services outlook also remains solid, supported by continued strength across Pharmacy Services businesses. Given these trends, existing shareholders may want to hold on to their positions for the longer-term benefits.
That said, 340B-related headwinds and an expected decline in Caremark membership remain key challenges for CVS Health and could weigh on near-term results. We believe prospective investors may be better off waiting for a more attractive entry point.
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CVS Health Trades at a Discount to Industry: How to Play the Stock?
Key Takeaways
CVS Health (CVS - Free Report) looks attractively valued, as reflected in its Value Score of A. The company is currently trading at a forward, one-year price-to-earnings (P/E) of 10.29X, below its historical median of 11.17X and the 16.23 P/E of the Zacks Medical Services industry. The gap is even wider against the broader Medical sector, which sits with a 20.55X P/E.
CVS also trades at a discount compared with two of its closest peers, UnitedHealth Group (UNH - Free Report) and Elevance Health (ELV - Free Report) , which command P/E multiples of 17.15X and 13.99X, respectively.
CVS Health’s 12-month P/E
Image Source: Zacks Investment Research
The stock’s performance over the past year has been encouraging as well. CVS shares have risen 14.5% compared to the industry’s 9.6% return and the sector’s 3.2% rise. Yesterday, it closed at $87.95, up 1.8% from the previous session and nearly 26.5% above its 52-week low of $69.51. In comparison, UnitedHealth Group has gained 2.1%, while Elevance Health is up 12.8% over the same period.
CVS’ 12-Month Price Performance
Image Source: Zacks Investment Research
While valuation and stock performance offer an encouraging picture, it is equally important to examine the underlying business trends to strengthen the investment case. Here’s a closer look.
Key Factors Favoring CVS Health
Aetna’s Margin Recovery Gains Momentum: CVS Health is making headway in its plan to restore Aetna’s margins through pricing discipline, medical cost management and operational changes. Health Care Benefits adjusted operating income rose more than $2 billion year over year in the first half of 2026. The second-quarter medical benefit ratio fell to 87.4% from 89.9% a year earlier, while Medicare performance exceeded expectations.
CVS raised 2026 Health Care Benefits adjusted operating income outlook to $5.03-$5.37 billion, more than $1 billion above its previous guidance. Operational initiatives are also supporting this effort. Aetna’s AI-powered Claims Assist Manager is designed to reduce processing time by more than 20% for complex manually reviewed claims, while the Aetna Clinical Collaboration program is being expanded to strengthen provider and member coordination.
Strength in Pharmacy and Consumer Wellness: CVS’ Pharmacy & Consumer Wellness business is gaining from higher prescription volumes and improving pharmacy economics. Second-quarter 2026 adjusted operating income increased 10.2% year over year, while same-store prescription volume rose 7%. Higher utilization and Rite Aid file acquisitions supported the gains. Prescriptions filled increased 4.3% on a 30-day equivalent basis, while the segment’s gross margin improved to 19.3% from 17.9% a year earlier. These trends helped offset regulatory-related price reductions, generic drug introductions and continued reimbursement pressure.
Management raised its 2026 adjusted operating income outlook for the segment by $220 million to at least $6.4 billion. The company is also expanding access to GLP-1 therapies through its pharmacy network, MinuteClinic services and cash-pay options, which could support additional prescription volume and customer engagement.
Health Services Shows Solid Progress: CVS’ Health Services business is benefiting from pharmacy drug mix, brand inflation, purchasing economics and ongoing progress in Health Care Delivery. In the second quarter, adjusted operating income rose 10% year over year. Management reiterated its full-year adjusted operating income outlook despite an updated view of 340B. Caremark continues to adapt its model as clients seek lower net costs and greater transparency.
The 2026 selling season generated more than $6 billion of new sales, which management described as well above its historical average. CVS Specialty continues to maintain adherence above 90%, while Caremark’s Humira biosimilar strategy has delivered more than $1.8 billion in client savings. Management also expects a strong specialty generic pipeline in 2027.
Technical Indicators for CVS
Despite the progress in its businesses, CVS Health’s technical picture remains weak. The stock is trading below its 50-day and 90-day simple moving averages, pointing to weaker near-term momentum.
CVS’ 50- and 90-day SMA
Image Source: Zacks Investment Research
What’s Weighing on CVS?
CVS Health’s 340B business, part of its Pharmacy Services unit, faced some pressure in the second quarter as the program’s environment remained dynamic. Pharmaceutical manufacturers are imposing restrictions on covered entities, which contributed to the impact during the quarter. At the same time, the shift of large specialty drugs to generic versions is creating additional pressure. CVS expects 340B to remain a headwind going into next year.
Also, Caremark membership is expected to decline next year as CVS works through the transition to a lowest-net-cost pricing model and takes a more deliberate approach to client renewals and the selling season. Industry pressures on legacy contracts, along with product actions and market exits by some health-plan customers, are also expected to affect membership.
As shown below, the Zacks Consensus Estimate for earnings for CVS Health’s remaining 2026 quarters has seen mixed revisions over the past three months.
Image Source: Zacks Investment Research
Endnote
CVS obviously stands out for its favorable valuation, recent share price gains and improving performance across key businesses. Aetna’s margin recovery is gaining traction, while higher prescription volumes and improving pharmacy economics are supporting growth in Pharmacy and Consumer Wellness. Health Services outlook also remains solid, supported by continued strength across Pharmacy Services businesses. Given these trends, existing shareholders may want to hold on to their positions for the longer-term benefits.
That said, 340B-related headwinds and an expected decline in Caremark membership remain key challenges for CVS Health and could weigh on near-term results. We believe prospective investors may be better off waiting for a more attractive entry point.
CVS carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.