CVS Health’s Latest Medicare Milestone: What Do Stronger Ratings Mean for Its Valuation?

CVS Health is in the spotlight this week after Aetna, its insurance arm, reported that over 81% of Medicare Advantage members are now enrolled in highly rated prescription drug plans. This reinforces market leadership.

See our latest analysis for CVS Health.

CVS Health’s recent initiatives, such as strong Medicare Advantage plan ratings at Aetna and investments in workforce development and digital health, have clearly restored investor confidence. The stock’s 22.7% 90-day share price return stands out, and its year-to-date gain of 77.4% shows momentum building after a tough period. A 1-year total shareholder return of 21.6% suggests the turnaround is being recognized beyond the short term.

If this renewed momentum in healthcare got your attention, consider your next move and explore See the full list for free.

With shares recovering and analyst outlooks turning more optimistic, investors now face a key question: Is CVS Health's stock still undervalued, or has recent performance already priced in the company’s next phase of growth?

Most Popular Narrative: 6.4% Undervalued

Compared to the last close of $78.44, the most-followed narrative sees CVS Health’s fair value higher, at $83.79. This valuation frames the current share price as having some headroom and spotlights expectations for stronger performance ahead.

Strategic acquisitions, digital investments, and vertical integration enable operational synergies, improved customer retention, and sustainable margin and earnings growth.

Read the complete narrative.

Want to know the growth blueprint behind this high valuation? The key element of this narrative is record-breaking earnings and a future profit multiple usually associated with tech leaders. Interested in which bold financial projections support that price target? Dive deeper to see the surprising numbers that drive this fair value calculation.

Result: Fair Value of $83.79 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, persistent reimbursement pressures in pharmacy and slow profit recovery at Oak Street could limit CVS Health's expected earnings rebound over the next few years.

Find out about the key risks to this CVS Health narrative.

Another View: Price-to-Earnings Tells a Cautionary Story

Looking at valuation through price-to-earnings, CVS trades at 22 times earnings, which is more expensive than both its peer average of 19.5 and the industry average of 21.4. While this indicates optimism about future growth, it may also signal heightened valuation risk if expectations are not met. Could the market be getting ahead of itself?

See what the numbers say about this price — find out in our valuation breakdown.

Build Your Own CVS Health Narrative

If you would rather draw your own conclusions from the numbers or enjoy working through the details yourself, you can craft your perspective in moments. Do it your way.

A great starting point for your CVS Health research is our analysis highlighting 3 key rewards and 3 important warning signs that could impact your investment decision.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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