Shares of CVS Health CVS are attractive because they are inexpensive and a good addition to a portfolio, especially while the market is volatile, Stephen “Sarge” Guilfoyle argues.
“CVS is a good place to hide in a volatile marketplace,” he wrote in a recent Real Money Pro column. “In addition, the firm pays shareholders 2.1% or $2.20 per year just to hang around.”
In it's latest 8-K filing with the SEC, CVS increased its full year 2021 adjusted EPS guidance to $8.33-$8.38 from $8.00. These numbers reflected what Wall Street was looking for, including the $8.03 adjusted number.
The drugstore company also reaffirmed guidance for 2022 GAAP EPS to $7.04-$7.24 and guidance for adjusted 2021 EPS of $8.10-$8.30. Wall Street estimated at $8.27 on this metric.
The company’s shares “seem cheap at 13 times forward looking earnings,” and are inexpensive because the fundamentals could use improvement, Guilfoyle wrote.
“That said the firm certainly seems to have the wind at its sails right now, and I am long the name,” he wrote. “Yes, I took profits a ways back, and missed some of the gravy.”
The company’s balance sheet also could use some work and is “not wonderful,” Guilfoyle wrote. The assets of CVS are outweighed by current liabilities even though the retailer’s cash levels are increasing.
One good sign is that the total assets still outweigh total liabilities as CVS has been paying down its long-term debt.
Guilfoyle’s target price is $116.