QS Research · Michael Burry's Scion Capital analyst template · 2006
CVS HEALTH Corp (CVS)
As of 2026-11-08 · 11/15 boxes filled from SEC filings and market data
Conclusion: WATCH
Conviction low · base case none · downside -42% · upside +84%
At $83.85 the market pays 8.0x TTM EV/EBITDA and 9.7x TTM P/E for $19.58B EBITDA and $11.04B net income to common, while TTM FCF is $15.57B, a 14.5% FCF yield. At today's 8.0x, $19.58B EBITDA gives $156.6B EV; less $49.68B net debt is about $107.0B equity, or about $83.6/share, so the base case is roughly today's price. The 5.7x Cigna-like downside is $48.4/share (-42%) and the 12.6x Elevance-like upside is $154/share (+84%), so the risk/reward is wide but the long rule is failed by the >25% downside. The catalysts — Aetna margin recovery, the 2027 EPS guide of at least $8.65 and the announced separation — are real but unproven; this is a watch, not a long.
Key numbers
- Share price: $83.85
- Market cap: $107.28B
- Latest financial period: TTM to Sep 30, 2026
- Revenue (TTM): $420.61B
- EV / EBITDA (TTM): 8.0x
- P/E (TTM): 9.7x
- Price / book: 1.33x
The 15 boxes
- ✓ 1. Long-form business notes
CVS Health's latest 10-K (FY2025, dated 2026-02-10) describes a four-segment health care company: Aetna-based Health Care Benefits, Health Services (PBM plus clinics/value-based care), Pharmacy & Consumer Wellness retail, and Corporate/Other. It earns insurance premiums/fees and PBM/pharmacy service revenue; at December 31, 2025 it reported approximately 9,000 retail locations, a PBM with approximately 87 million plan members, and more than 37 million people in insurance products. The FY2020-to-FY2025 comparison shows a renamed segment set, shrunken PBM membership/prescription volume and retail footprint, and much lower operating income ($13.91B FY2020 to $4.66B FY2025) despite revenue growth ($268.71B to $402.07B). The latest 10-K also records the January 2026 exit from Aetna's Public Exchange business.
- ○ 2. Competitive advantage
The sources show a business with enormous scale and no demonstrated pricing power: revenue rose from $268.71B in FY2020 to $402.07B in FY2025 while operating income fell from $13.91B to $4.66B, so the derived operating margin compressed from roughly 5.2% to 1.2%. What is durable is cash generation, not margin: FY2025 operating cash flow was $10.64B against $2.83B capex and $4.61B of D&A, versus net income to common of only $1.77B. The 10-K describes all three segments (Health Care Benefits, Health Services/PBM, Pharmacy & Consumer Wellness) as 'highly competitive', with customers free to move, PBM price compression, a regulatory cap on insured margins via minimum MLR rebates, and two newly flagged threats to the integrated model (state PBM-affiliated pharmacy licensure bans and manufacturer direct-to-consumer selling). Net: a scale and network business with thin, regulator-capped margins and no evidence in these sources of switching costs or brand-based pricing power.
- ✓ 3. 10-Q takeaways
Q3 2026 (quarter ended September 30, 2026) total revenues rose 5.4% to $108.4 billion and adjusted operating income rose 21.2% to $4,194 million, with adjusted operating income up in all three operating segments. GAAP operating income of $3,566 million versus a $(3,207) million loss in Q3 2025 mostly reflects the absence of the $5.7 billion Health Care Delivery goodwill impairment booked in the prior-year quarter, not a like-for-like gain. Management raised full-year 2026 guidance on EPS, revenue and cash flow from operations, and on November 4, 2026 announced an intended separation into two public companies and added a related risk factor. Utilization remained elevated and 2027 Medicare Advantage star ratings weakened versus 2026.
- ✓ 4. Corporate governance
Filled; members read this box.
- ✓ 5. Overview of the prior 3 years of 8-K filings
Filled; members read this box.
- ✓ 6. Other significant filings
Filled; members read this box.
- ✓ 7. Chronology of significant news and events
Filled; members read this box.
- ✓ 8. Comparables valuation interpretation
Filled; members read this box.
- ✓ 9. Insider trading interpretation
Filled; members read this box.
- ○ 10. Earnings-call notes
- ○ 11. Impression of the shareholder letter
- ○ 12. Scuttlebutt overview
- ✓ 13. Valuation and risk/reward summary
Filled; members read this box.
- ✓ 14. Current price suppression and potential catalysts
Filled; members read this box.
- ✓ 15. Conclusions
The call above.
Sign in with a QuantSignals Premium or Gold plan to read every box: each point linked to the SEC filing it came from, the bull and bear case, and the comparables. QS Research powers the signals behind FST, our autonomous trading agent.