CVS Health CorporationCVSNYSE

Overview Intelligence Charts News Fundamentals Key Metrics TTM Financials Earnings Growth Rating Analysts Institutional Peers Historical

DCF Valuation

⚠️Model Warnings

•Terminal value represents 89% of enterprise value. Valuation highly sensitive to long-term assumptions.

DCF Valuation Summary

Strong Buy

Fair Value: $1,049.81 per share(market-calibrated)

+1185.6%

Upside to Fair Value

Current

$81.66

Pure Model

$1,219.94

Fair Value

$1,049.81

Bull Case

$1,509.49

Bear Case

$1,016.59

Market Reality Check

Model Terminal Growth

3.00%

Market-Implied Growth

0.50%

Calibrated Growth

2.13%

Fair value uses 65% model / 35% market-implied terminal growth. Pure model: $1,219.94.

What's Driving This Ratingfor CVS

✓

CapEx already efficient

CapEx at 0.69% of revenue is already at or below sector maintenance level. No normalization needed — cash conversion is already strong.

↑

Margin expansion modeled

Current EBIT margin is 2.92% — below the sector mature average of 20.00%. Model expands margins as the business scales and operating leverage kicks in. Year 10 EBIT reaches $83.9B (14.40% margin).

→

Moderate revenue growth

Analyst consensus projects 0.90% revenue growth, fading to 3.00% by Year 10. Revenue reaches $582.8B (vs $402.1B today).

🎯

Market pricing in lower growth than model

The market implies only 0.50% perpetual growth — 250bps below the model's 3.00%. This suggests the market sees headwinds or risks not in the model.

✓

Strong cash flow conversion

Year 10 FCF/EBITDA conversion of 75.57% indicates efficient cash generation. FCF reaches $67.3B by Year 10 (11.55% FCF margin).

Weighted Average Cost of Capital (WACC)

Cost of Equity (CAPM)

Risk-Free Rate (Rf)4.50%

Beta (β)0.50

Market Risk Premium4.50%

*Using current implied premium (4.5% per Damodaran 2026), not historical (6.5%)

Cost of Equity (Re)6.75%

Cost of Debt

Pre-tax Cost of Debt2.89%

Tax Rate19.10%

After-tax Cost of Debt2.34%

Equity Weight (E/V)52.50%

Debt Weight (D/V)47.50%

WACC Calculation

WACC = (E/V × Re) + (D/V × Rd × (1-Tc))

WACC = (52.50% × 6.75%) + (47.50% × 2.34%)

= 5.50%

10-Year Free Cash Flow Projections(showing years 1, 3, 5, 7, 10)

Year	Year 1	Year 3	Year 5	Year 7	Year 10
Revenue	$405.7B	$448.8B	$493.1B	$530.3B	$582.8B
EBIT	$11.8B	$13.1B	$14.4B	$48.1B	$83.9B
Tax	$2.3B	$2.5B	$2.7B	$9.2B	$16.0B
NOPAT	$9.6B	$10.6B	$11.6B	$38.9B	$67.9B
+ Depreciation	$3.6B	$3.9B	$4.3B	$4.7B	$5.1B
- Capex	$2.8B	$3.1B	$3.4B	$3.7B	$4.0B
- Δ NWC	$364M	$2.3B	$1.9B	$1.8B	$1.7B
Free Cash Flow	$10.0B	$9.2B	$10.7B	$38.1B	$67.3B
Discount Factor	0.948	0.852	0.765	0.687	0.585
Present Value	$9.5B	$7.8B	$8.2B	$26.2B	$39.4B

FCF Formula: Free Cash Flow = NOPAT + Depreciation - Capex - Change in Net Working Capital

Terminal Value Calculation

Perpetuity Growth Method

Year 10 FCF$67.3B

Terminal Growth Rate3.00%

WACC5.50%

TV = FCF₁₀ × (1+g) / (WACC-g)

Terminal Value$2.8T

PV of Terminal Value$1.6T

Exit Multiple Method

Year 10 EBITDA$89.1B

Exit Multiple (EV/EBITDA)24.0x

TV = EBITDA₁₀ × Exit Multiple

Terminal Value$2.1T

PV of Terminal Value$1.3T

Valuation Summary

Perpetuity Growth Method

PV of Projected FCFs$193.4B

PV of Terminal Value$1.6T

Enterprise Value$1.8T

(-) Net Debt$85.1B

Equity Value$1.7T

Shares Outstanding1.3B

Price per Share$1,366.75

Exit Multiple Method

PV of Projected FCFs$193.4B

PV of Terminal Value$1.3T

Enterprise Value$1.4T

(-) Net Debt$85.1B

Equity Value$1.4T

Shares Outstanding1.3B

Price per Share$1,073.13

Pure Model Fair Value

$1,219.94

Average of perpetuity growth and exit multiple methods (before market calibration)

Sensitivity AnalysisPrice per Share

WACC ↓ / Growth →	2.00%	2.50%	3.00%	3.50%	4.00%
3.50%	$1,587.13	$1,516.06	$1,448.40	$1,383.99	$1,322.63
4.50%	$1,337.33	$1,516.06	$1,448.40	$1,383.99	$1,322.63
5.50%	$1,032.45	$1,110.57	$1,219.94	$1,383.99	$1,322.63
6.50%	$845.59	$887.45	$941.27	$1,013.03	$1,113.49
7.50%	$714.62	$739.81	$770.59	$809.07	$858.55

How to read: This table shows how the valuation changes with different WACC (discount rate) and terminal growth rate assumptions. Green = undervalued, Red = overvalued.

Scenario Analysis

Bear Case

$1,016.59

1144.9% vs current

• -25% vs analyst consensus
• Terminal growth: 2.5%
• Beta: 0.63

Base Case

$1,219.94

1393.9% vs current

• Analyst consensus
• Terminal growth: 3.0%
• Beta: 0.50

Bull Case

$1,509.49

1748.5% vs current

• +25% vs analyst consensus
• Terminal growth: 3.5%
• Beta: 0.43

Key Assumptions & Drivers✓ Using Analyst Consensus Estimates• Healthcare Sector

Growth Assumptions (Select Years)

Year 1 Revenue Growth0.90%

Year 3 Revenue Growth5.35%

Year 5 Revenue Growth3.99%

Year 7 Revenue Growth3.60%

Year 10 Revenue Growth3.00%

Terminal Growth Rate3.00%

Margin & Efficiency

Current EBIT Margin2.92%

Terminal EBIT Margin20.00%

Tax Rate19.10%

Historical Capex / Rev0.69%

NWC / Revenue10.00%

Key Drivers: Revenue growth, operating margin expansion, capex efficiency, and working capital management are the primary drivers of cash flow generation. Terminal value assumptions significantly impact final valuation.

Institutional-Grade Methodology

Actual Company Data: Revenue, EBIT, Capex, NWC, Tax Rate, Interest Expense, Beta

Market Assumptions: Risk-free: 4.5% (10Y), MRP: 4.5% (Damodaran 2026), Exit: 24x EV/EBITDA (Healthcare sector)

This DCF model is for informational purposes only. Projections are based on assumptions that may not materialize. Past performance does not guarantee future results. Consult a financial advisor before making investment decisions.

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