저자: Dylan · 외국인
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CVS Health는 리테일 약국 외에 보험(Aetna), PBM(Caremark), 방문진료 등 사업 다각화를 했으나 주가는 약 10년간 횡보하고 YTD -28%. 배당수익률 4.7%, 선행PE 8배 수준으로 저렴해 보이지만 부채 약 570억달러, 유동비율 0.81, ROIC 4.4%로 재무 우려가 큼. 제3자 Michael Burry의 과거 매매를 언급하며 단기 스윙 가능성을 논하나 장기 보유는 아직 판단 보류.
다듬은 글
hey welcome back to two super guys Fred stocks I'm Dylan and I'm Vinnie and today we're going to talk about a stock that Michael Bry has owned in the past multiple times and kind of is the partner to our Walgreens video we did last week we're g to get a little bit into the nitty-gritty of what exactly is CVS health and what the financials look like for them we get to it all right so we did this video last week this is the thumbnail did like very well actually people are really interested in what's going on with Walgreens right now the stocks down massively a lot of people were talking like you said about how our comparison to meta was ridiculous but you know to me I'll compare companies because I'm looking at it from an investment opportunity basis doesn't matter what they are in right yeah it could be selling Tacos on the side of the road if I can make money on it I can make money on it yeah I mean so I people were saying how can you compare Walgreens to meta I agree meta is awesome and it has a much better moat but if you look at like 10year returns of meta and dominoes they're almost the same it it's very close and I would argue Domino's has zero Mo there's so there's Pizza everywhere so yeah it's not is Walgreens as good as meta no it's not it's is this value way too low for what you're getting and it would it be a good investment opportunity like actually another good example when I did a video on Schwab right because Schwab took that huge hit they're up 50% from where I bought it about 50 to 75 it outpaced the market so is a solid buy am I a huge Schwab guy not really but when it's when a stock is just too low for no reason that's when you look okay should this be a buy so like CVS it could it could be a problem Vinnie did the research on this not me so I don't know yet I'm I'm yeah um but when you have a stock in a sector that is like Walgreens it brings the entire sector down so yeah yeah that's true I mean as a sector headwind there's a lot of issues here th this is just something I want to highlight here right this is like a maximum duration stock chart I could get from the Yahoo of CVS Health right and look at the current price levels and look at the prior times we were at those same price levels you're talking about 2019 they they were around the same 55 $60 per share and then all the way back to 2013 2014 was the first time they TS this value this is a stock that effectively if you look at it from that standpoint hasn't gone anywhere for a decade yeah that's not ideal yeah I mean unless you sold at 110 then what can happen sometimes is that the stock price has has yet to catch up to the business fundamentals hopefully improving so that's what we're going to look at it through that eye or that lens to see if maybe that's the case is going on here and just to kind of remind you this is from bur's most recent 13f he currently does not hold any CVS stock he has owned it multiple times uh but in the most recent quarter he sold his entire position and closed it out but that doesn't mean he's totally going to be having like an eye on the stock and may open a position again in the future knowing him he trades in and out of the same ticker multiple multiple times I believe he lost money on this one yeah yeah when he bought right we looked at that yeah yeah he did he has actually held it before and made money but I mean it's hard to make money on a stock when the stock went down 28% year to date all right and when that's one when you have the backdrop of the entire Market hitting the all-time highs it's crazy uh divid investors love this stock look at this current yield 4.7% all right okay this is another like you know crazy thing to think about is when you see a household name all right and look at this forward PE projection under eight like this just insane says dig dig more all right dig more daddy dig more daddy oh man I hope people start calling you that that'd be great right uh so I I got some some kind of charts here from macr Trends to kind of highlight like overall what's been going out with them for the last several years uh Revenue you know growth pretty consistent uh they did have like a little bit of an increase here you're going to talk a little bit about some Acquisitions they have made um that's definitely part of their strategy is not just their you know Legacy pharmaceutical you know growth but also growth by acquisition all right gross profit took a nice jump up here uh you know with the addition of some of those Acquisitions but you know they've maintained a pretty solid gross profit growing over time right okay net income a little less so very very spiky all over the map once again it's it's hard to integrate these these companies as they acquire them you have to look at each acquisition as an independent deal of whether or not you would make it and would would you make it for that price which can definitely you know complicate your valuations of companies right shares outstanding all right part of the Acquisitions were funded through you know shares share offerings which is not something I love to see because personally you know if your Shares are undervalued which when you have a company that stock price hasn't moved in a decade it makes you a little suspicious that maybe these things are actually undervalued right um you'd have to do individual analysis on that point in time but still I don't love using my shares as funds I'd much rather use cash if that's available to me right uh but like since that acquisition they have kind of started to buy back shares so they are redeploying capital back towards shareholders through both dividends and share rep purchases that is indeed their their preferred motop rendi if you will I believe someone's gonna ask this in the comments would you prefer only dividends or only share BuyBacks I like share BuyBacks more yeah that's just me I'm not a dividend guy um I want to do a separate video on that at some point um but this is looking at the Historical PE over time so you see that for the most part back in the early 2010s you hang hovering around 10 they had like a little slight increase got kind of choppy with the Acquisitions here but there t t seem seems to be their Baseline with anything else right that's really really where their PE hangs out they yet to be priced at premium when you're looking at overall Market being 20 PE is is very you know reasonable and some of the biggest named tech companies in the world are trading for like 40 plus pees right um same thing for price to free cash flow all right um they tend to hover in this kind of like high single digit territory for price to free cash flow and they're pretty close to their historical average throughout this entire time period which is crazy all right when you think of CVS Health this is what you picture right yes yeah your corner drugstore uh what if I told you that this is actually a like picture of CVS overall CVS okay well okay so I'm in Derm so I deal with CVS KARK all the time I will say whenever if anyone's familiar with good RX it's a great way to get cheaper medications Walgreens sucks um it's just at least in Arizona it's twice the price all the time yeah so I always direct towards CVS fries Mark Cubans whatever yeah yeah so there's a lot lot of other aspects to the CVS business than the retail pharmacy right don't forget they own enna which is one of the largest health insurance companies in in the country it's like number three after Blue Blue Cross and United they own them all right they own KARK which is the pharmacy benefit manager uh I want to say it's the largest Pharmacy Ben benefit manager in terms of the number of prescriptions per year that they process which is pretty crazy um signify Health which is a inhome assessment company that does medical exams for seniors and other people that are incapable of going out and being properly examined um we should clarify here I also work at medicine um over two million visits a year uh so it's a pretty pretty large entity as far as that aspect and then they recently acquired Oak Street Health an all cash deal please they didn't burn shares for this one um almost 11 billion doar and this is um a primary care U provider I can't remember exactly the scale of this operation but not small like over10 million dollar company all right so this is when we're looking at corporate level price to free cash flow free cash flow per share this scares the EV living crap out of me um look at this trend over the last couple years you know they were hovering these these low teen range and it the the price uh free cash flow per share on the trailing 12 month basis has just plummeted in down by 50% over the last couple years okay also yeah I just looked it up for you Oak Street Health 170 centers 2 States so it's pretty big yeah it very sizable acquisition now you know I've read through the annual report um most recent one and this is where you really have to do your due diligence this is not like a a simple analysis um they had over 30 pages of risk factors listed all right that is by far and away the largest I think I've ever seen for a company which is impressive okay all right and you know the fact that they're making all these Acquisitions in all these different lines of business within Healthcare even they call out the fact that we we don't even know what we're g exposing ourselves to now that we are diversifying across all the different aspects of U you know medicine and one thing I wanted to highlight from a kind of a governmental risk standpoint here is the cost of farmal drugs have certainly been at a front and center of politics United States for a little while um this is from this this is you know the the top 10 or dirty 10 uh of the Biden administration's efforts towards reducing cost of medications particular which is you know working medicine these are certainly medications that are sought after and are notoriously expensive um but it's not just a partisan thing where you're going to see Democrats and we have this upcoming election this is something that's bipartisan uh both parties have really focused on seniors healthcare for seniors and reducing costs so this is going to be a continued area of you know political risk for companies like CVS right highlight that as far as some of the other Financial numbers I want to go over here all right you familiar with current ratio at all go across this so think of it basically as bankruptcy risk right this is telling you at current assets versus current liabilities yeah right and ideally you want this over 1.5 meaning that they have enough assets that even in a fire sale condition where they had to take 30% off the price they could meet all their current liab abilities I did not realize that was called current ratio but yes current rric yeah so CVS has a pretty horrible current ratio 0.81 it's worth than 94% of the other companies within the healthcare industry according to Guru hogus not great all right not ideal um however I that this would be an interesting debate uh CVS may also be in the two big def fail category you know yeah they have a lot of governmental risk but they're so large and so important to heal United States that I find it hard to believe that if they try to you know have a cash flow situation that uh government entities wouldn't come to their assistance crazy I think so I'm I'm not gonna lie I'm completely ignorant to CPS I did not know that they owned Edna yeah so Edna is huge yeah so I would have to agree unfortunately I hate that that exists anything that's too big to fail I don't like that but I I would I would agree so yeah so does this number matter yes does it matter as much as it would appear to probably less so is is what I'm trying to get out with that um return on invest in capital all right this is how good is CVS Health at employing their their kind of money in terms of returning you know uh or getting a return on that invested money back for shareholders and 4.4 is pretty horrendous um personally like you look at companies that are in double digits would be ideal when you're looking at other Industries particularly Tech it's certainly much more achievable over there um so this makes me go okay you know is it a company that I absolutely love the way that they're investing and they're buying all these other entities I don't know you really have to buy the long-term vision of CVS becoming this you know One-Stop you know gargantuan Healthcare company that you know you can't avoid it touches so many parts of your life and it is in some parts but you know will that return money to them I don't know they haven't been able to monetize it the way that a Google can right or apple uh so when you look at the trail 12 months free cash flow I love cash flow that's really how I want to value a business it's a 10.89 billion dollar with a triling 12 months remind you like I said this has come down significantly from where they were a couple years ago um they have $9.8 billion in cash $3.3 billion in Investments carried on their balance sheet as the most recent quarter um I don't adjust for working capital versus you know non-working capital I just use the entire thing as a l summon when I'm calculating my Enterprise Value this is another scary thing with them they have this 57 billion doll in uh in debt setting the balance sheet that's their market cap is like 75 billion I figur exactly youd have to do the math here to figure that out but um you can all get it from CNBC it's almost the equal you know Parts uh equity and debt as far as their ownership I don't quite understand why their dividend is so high when they have that much long-term debt I get that it can be attractive for some investors but short-term gain longterm pain yeah they should be paying that down and not I am not a a fan of these companies that leverage themselves and prioritize dividend payment and dividend growth over anything else that's why I don't like dividends I think it makes management be even more short-sighted um than uh trying to you know buy back shares and invest internally um I I don't like the capital allocation plan for CVS Health um but you know as far as when we get to the numbers meeting the road here right so $15 billion Enterprise Value and based upon the trolling 12 months that'd be a 99.4% free cash flow yield right so is that good yes um is that great no I mean we love Chinese equities here and you know we're talking about many Chinese equities having you know 2025 sometimes 40% uh triling 12 months like free cash flow yield um and when we talk about like major American tech stocks yeah two and a half to 5% would be a pretty attractive uh free cash flow yield there probably closer to five uh and this is certainly above that but there's a lot of questions here that you would have to be able to answer one I implore you to read those 30 pages of of risk to the business um two I want you to kind of basically I would think about what their long-term vision is here regarding healthcare and whether or not that's something that they can actually achieve or becoming this One-Stop shop for all these different aspects of the American Healthcare System um you know certainly the geopolitical risk is something you want to be evaluating here and then the the massive amount of Leverage here because management to me has shown uh poor prioritization as far as what they're deploying their dollars for they're making Acquisitions they're they're taking on debt still when it's like in a very expensive environment um rather than you know choosing to pay that down at the expense of reducing their dividend which is something I would prioritize personally um but there's a lot of questions still to be answered here um I know bur has bought it and sold it multiple times so it's more of a I guess a swing trade for him than it is anything else um but as a long-term hold I'm not there yet I would need to do more evaluation of this um before I would even consider whether or not it belongs in my portfolio long term so couple thoughts one the Walgreens current ratio is 65 perfect so not ideal one in no way shape or form is Walgreens and EVS going bankrupt we just don't have the infrastructure I guess I can't say that 100% 99.99% chance both of them don't go bankrupt yeah it just we there's just too many people that rely on health care and medications it just it's just not really an option um on top of that the free cash flow is pretty solid ah can you go back to the Chart so yeah I don't I wanted to like this more there's just there's just two many better opportunities in the market now there is two comments I have one I do think that this is a pretty interesting swing trade now this is not an interative chart so I can't look at the exact numbers but you can see there's clearly a level around 51 that we got close to hitting but haven't hit so when that hits I may do a call option um and then I love these trades because you can just do a super short stoploss the the risk of losing is way higher than winning but the amount that you lose is not not that much at all because you just set a stop loss below 50 and then if it go if it happens it happens so it's usually a pretty short Michael bues trade um that you just leverage calls I do that on these all the time now there could be a recession coming and that would kill this it wouldn't kill it that would bring this down pretty hefty I think it would you know think it would uh no it's more Consumer Staples than anything else at this point you know these aren't uh discretionary purchases they're not selling Louis Vuitton handbags here right they're they're selling medications you need to stay alive and access to Primary Care well this is America people care more about Gucci handbags and but yeah I think if this hits 40 this is significantly more attractive but I it's just too high for what you just said that's a bummer damn it yeah it's one I'm want to keep my eye on though and I'm I'm going to listen to their next Cotter conference call and pay a little bit more attention to it's a little bit more on my radar now than it was before that way the Deb's huge that's crazy way too much debt I want to hear from management themselves as far as long-term plan and capital allocation plan I want to hear how they spin it how they sell it that's what I want to know all right guys let us know what you think if it deserves a spot in your portfolio y catch you the next one
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