NEW YORK (TheStreet) -- In our last coverage of CVS Healthcare (CVS) - Get Report on November 11,we saw a weak chart picture and the story hasn't changed.
CVS peaked at the end of July/early August and has been under selling pressure since, see chart above. There was a death cross in October as the 50-day Simple Moving Average fell below the slower 200-day moving average. In early November, CVS gapped down below both averages. Prices have tried to stabilize in the $90 to $95 area and there is a small bullish divergence between the lower lows in price and a higher low on the momentum study, but the On-Balance-Volume (OBV) line is not showing any accumulation. The path of least resistance appears to be lower.
This longer-term chart of CVS, above, doesn't suggest a turnaround or reversal to the upside. Prices are below a flat 40-week moving average. The OBV line is flat on this timeframe, and there isn't a bullish divergence between the lower lows on the price chart and the momentum study on this time frame. The next trigger point for CVS is a break below the recent low at $90, which could precipitate a deeper decline to the next support level around $80.
TheStreet Ratings team rates CVS HEALTH CORP as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:
We rate CVS HEALTH CORP (CVS) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, growth in earnings per share, increase in net income, good cash flow from operations and largely solid financial position with reasonable debt levels by most measures. We feel its strengths outweigh the fact that the company shows low profit margins.
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The revenue growth came in higher than the industry average of 12.0%. Since the same quarter one year prior, revenues rose by 10.3%. Growth in the company's revenue appears to have helped boost the earnings per share.
- CVS HEALTH CORP has improved earnings per share by 35.8% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, CVS HEALTH CORP increased its bottom line by earning $3.96 versus $3.75 in the prior year. This year, the market expects an improvement in earnings ($5.17 versus $3.96).
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Food & Staples Retailing industry. The net income increased by 31.4% when compared to the same quarter one year prior, rising from $948.00 million to $1,246.00 million.
- Net operating cash flow has increased to $1,820.00 million or 10.63% when compared to the same quarter last year. In addition, CVS HEALTH CORP has also modestly surpassed the industry average cash flow growth rate of 10.24%.
- The debt-to-equity ratio is somewhat low, currently at 0.73, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.74 is somewhat weak and could be cause for future problems.
- You can view the full analysis from the report here: CVS
Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of Jim Cramer, TheStreet or any of its contributors.