CVS Stock at 13.6 Times Forward Earnings: Is the Estimate Stale?

CVS Health carries two price-to-earnings ratios that cannot both be right: 23.4 times trailing earnings and 13.6 times forward earnings. At around $88.84 a share as I write this, the stock is either expensive or cheap depending on which column you read, and a third number, from the company’s own guidance, points somewhere else again.

Sorting that out is most of the work with this stock. The trailing figure rests on $3.79 of earnings per share over four quarters. The forward figure rests on $6.52, which is 72 percent higher. And on August 5, 2026, CVS raised its full-year guidance to adjusted earnings of $7.90 to $8.10 per share, up from $7.30 to $7.50.

My view is that the trailing multiple is a distortion, the forward multiple in the data I use looks dated, and the honest valuation sits in a range that starts near 11 times guidance and ends near 23 times trailing. The stock is a recovery in progress. Whether it is a bargain depends on one thing I can name: whether medical costs in the insurance arm stay inside what the guidance assumes.

Why trailing earnings mislead here

Trailing earnings add up the last four reported quarters. When one of them is unusually weak, the sum is small and the multiple balloons. CVS’s trailing P/E of 23.4 is inflated by that effect. The database also shows a five-year average multiple of 32.2, which tells you the ratio has been swollen by depressed earnings for years, not just this one.

The scale of the swing shows up in the annual figures. Net income for the latest full year was $1.7 billion, down from $4.6 billion the year before, on revenue of $402.1 billion. Net margin rounds to zero. Operating income was $10.4 billion, so the gap between operating profit and net income is large, and I read that as charges and interest, not a collapse in the underlying business. I did not itemize those charges from the filings, so treat that as an inference.

Compare that with the most recent quarter. CVS reported adjusted earnings of $2.58 per share for the second quarter, more than 40 percent above the year before, on revenue above $106 billion, per the company’s release. One quarter at that pace, times four, is $10.32. Adjusted earnings exclude items such as intangible amortization, so that is not a like-for-like comparison with the trailing GAAP figure. Even so, the distance between $3.79 and a run rate above $10 shows how much a single weak quarter distorts the trailing number.

When that weak quarter rolls out of the sum, trailing EPS will jump and the multiple will fall without the price moving. There is a practical consequence for anyone who screens stocks mechanically. A filter on trailing P/E will show CVS as expensive today and cheap after the next report, while the business itself sits exactly where it was. Screens built on a single ratio produce that kind of whiplash, and the fix is to read the quarterly figures behind the ratio before trusting it. I would rather do that reading once than trade on a number that changes for accounting reasons.

The forward number needs a second look

The forward multiple of 13.6 implies earnings of $6.52 per share. Management’s raised guidance midpoint is $8.00. At $88.84, guidance implies about 11 times earnings, not 13.6.

Why the gap? I see three possibilities. The estimate in my data may lag the guidance raise. It may sit on a GAAP basis while guidance is adjusted. Or analysts may be haircutting the guidance because the company itself says it keeps a cautious view given high cost trends and possible macro headwinds. I cannot tell which from the data I have, and I would rather say so than pick the answer that flatters my thesis.

The difference matters. At $6.52 the stock deserves a mid-teens multiple and offers modest upside. At $8.00 an 11 times multiple looks cheap for a business with a dividend and a raised outlook. Half of what I would call the bull case lives in that gap, and it is a gap I can measure only after the next quarterly report.

Basis	EPS	Multiple at $88.84
Trailing four quarters	$3.79	23.4x
Consensus forward (database)	$6.52	13.6x
Guidance midpoint, adjusted	$8.00	about 11.1x
Five-year average trailing	n/a	32.2x

Revenue growth is steady, margins are thin

Sales are not the problem. Revenue for the June quarter was $106.1 billion, up about 7 percent from a year earlier and about 6 percent above the prior quarter. The latest full year came to $402.1 billion, up 8 percent from $372.8 billion, and the figure three years back was $322.5 billion. That is a company that added roughly $80 billion of revenue in three years.

Size cuts both ways. CVS runs pharmacy benefit management, retail pharmacies and an insurer, and on $402 billion of revenue a 1 point change in margin is $4 billion of profit. Operating margin is around 1.3% and gross margin 13.8%, flat from the prior year. There is very little cushion, which is why the stock can move so sharply when medical costs surprise.

The insurance side is where the risk sits. I wrote about how that dynamic played out at UnitedHealth, where a spike in the medical cost ratio reset the whole debate about that business. CVS’s Aetna is exposed to the same forces in Medicare Advantage and in the individual market. The Q2 release credits Health Care Benefits and the pharmacy segment for the raise, but it also warns about high cost trends. Both statements can be true in the same quarter.

Analysts lean one way

Of 18 analysts, 100% rate the stock a buy. The average target is $115, about 29% above the current price, with a low of $106 (still 19% up) and a high of $125. Even the lowest target sits above the price.

I distrust that kind of consensus. When every analyst is a buyer, the surprise risk is one-sided: a good quarter is expected and a bad one is punished. The last earnings reaction fits the pattern. After the August 5 report, a beat and a raise, the stock moved -5.1% on the day. I do not claim to know why, and the data does not say. Average earnings-day moves run about 3.7%, so a 5 percent drop is normal for this name and does not by itself signal anything.

The stock sits 19.2% below its 52-week high of $110 and 30% above its low of $68. Short interest is only 1.4%. Nobody is betting against it heavily, which means there is little squeeze fuel if results are good.

What income buyers get

The dividend is $2.66 per share a year, a yield of 2.99%. Against trailing earnings of $3.79 that is a payout of about 70 percent, which looks stretched. Against the $8 guidance it is about 33 percent, which looks comfortable. The dividend is the clearest illustration of why the earnings basis matters.

For a stock at a 23 times trailing multiple, a 3 percent yield with a 70 percent payout would be a warning. At 11 times guidance with a 33 percent payout, it is a decent holding while you wait. I would not buy CVS for the yield alone, but the yield is part of what pays a holder to be patient. I treat the payout on guidance as the more relevant figure and the trailing one as a caution.

Comparing it to its own history

The five-year average of 32.2 times will not help much, since it is skewed by depressed earnings. Price-to-sales is a steadier reference: 0.3 now against 0.3 on average, essentially unchanged. Price-to-book is 1.5 against 1.4. On those measures CVS is priced in line with its recent past, not at a discount to it.

That is worth setting beside the approach I used for Medtronic, where the five-year multiple was a useful anchor. For CVS the anchor is missing because earnings have been too unstable, and an analyst who tells you otherwise is picking a convenient number. It also connects to the point in my piece on what a high P/E requires: a multiple only means something once you know what earnings it sits on.

What would prove me wrong

My working view is that CVS at $88.84 is reasonably priced but not obviously cheap, and that the next two quarters decide it. There are two ways I could be wrong. If adjusted earnings per share for the third quarter come in below $2.00, the guidance range of $7.90 to $8.10 starts to look aggressive and the stock has no valuation cushion left. On the other side, if the company reports adjusted EPS above $2.50 again and raises guidance a second time, the forward number in my data is plainly stale and 11 times earnings is too low for a company growing revenue 7 percent a year.

Until one of those happens, I treat the stock as a recovery in progress. The first number I would check after the next report is whether the medical cost ratio in the insurance arm stays at or below the level implied by the raised guidance.

Analysis and opinion only, not investment advice. Figures come from CVS Health’s filings on SEC EDGAR and its investor site; valuation multiples are approximate and were checked on September 22, 2026.