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The drugstore industry is well positioned for long-term growth due to the growing demand for prescription drugs. Let’s compare CVS Health (CVS) and MedAvail (MDVL) in this space to determine which is better positioned to take advantage of the solid growth prospects of the industry.
This article refers to CVS Health Corporation (CVS) and MedAvail Holdings, Inc. (MDVLMore), to decide which is the better investment. Based on a basic comparison of these stocks, I believe CVS is the better buy for the reasons explained throughout this article.
Healthcare is considered one of the safest industries to invest in due to its stable demand even during recessions. Regardless of the economic cycle, healthcare companies typically deliver stable profit margins.
The US pharmacy sector can be categorized into four types: retail chains, community pharmacies such as mass retailers and grocery stores, independent pharmacies, mail order and online pharmacies.
The drugstore industry is well-positioned for long-term growth due to increased demand for prescription drugs thanks to private health insurance and rising demand from an aging population. US pharmacy and drugstore industry market size in 2022 he was $553.9 billion.Industry revenue is expected to increase 2.9% YoY growth to $569.8 billion in 2023.
Last year, President Biden signed the Inflation Control Act into law. The law was intended, among other things, to bring down the cost of prescription drugs. The new Medicare Prescription Drug Inflation Rebate Program protects Medicare subscribers and taxpayers if drug companies increase prices faster than inflation.
This law saves Medicare participants significant savings on prescription drugs, making health care more accessible, affordable, and equitable. The new drug law strengthens the Medicare program by reducing drug costs and stabilizing prescription drug premiums.
This is expected to increase consumer purchasing power, increase demand for healthcare products and pharmaceuticals, and benefit pharmacies and drugstores. CVS beat his EPS and earnings expectations for the first quarter. The company’s EPS beat analyst forecasts by 5.2% and revenue beat consensus forecasts by 5.7%.
Karen S. Lynch, President and CEO of CVS Health, said, “Continuing to execute on the strategy outlined in December 2021 and having a strong quarter, we have completed the acquisition of Signify Health. and Oak Street Health soon followed.These additions demonstrate our strategy to unlock future growth as we further advance value-based care that prioritizes keeping people healthy. will help.”
MDVL CEO Mark Doerr said: “Since the first quarter we announced the sale of a portion of our SpotRx assets to his CVS, we have made good progress towards our mission to become a leader in the development and manufacture of pharmacy technology solutions in a short period of time. January. “
“Our pipeline continues to grow, representing both new and existing partners, and we are on track to achieve our previously stated goal of adding net new pharmacy MedCenters to our network of 25 companies this year. We are moving forward,” he added.
2023 CVS adjusted EPS is expected to be between $8.50 and $8.70. Operating cash flow is expected to reach $12.5 billion to $13.5 billion. Total revenue for his MDVL pharmacy technology business in fiscal year 2023 is expected to be his $3 million. Gross margin is expected to be over 60%.
In terms of price performance, MDVL shows better performance than CVS on one-off frames. MDVL shares are up 4.1% over the past month, while CVS is down 6.4%. However, CVS’s stock has performed better than MDVL’s on other timeframes, despite both companies reporting negative stock performance.
CVS shares have fallen 32.4% over the past nine months and 30.8% over the past year. In contrast, MDVL’s stock has fallen 80.4% over the past nine months and 85.9% over the past year.
Here’s why I think CVS can improve performance in the short term.
positive development
On May 2, 2023, CVS announced it would acquire Oak Street Health for $39 per share. This equates to an enterprise value of approximately $10.6 billion. The acquisition expands CVS Health’s value-based primary care platform to benefit long-term patient health through improved outcomes and reduced costs.
On March 29, 2023, CVS announced it would acquire Signify Health for a total of $8 billion. “This transaction advances our value-based care strategy by increasing our presence in the home,” said Karen S. Lynch, president and CEO of CVS Health. As we continue to redefine how people access and experience care, our expanded capabilities will bring us closer to the consumer.” It’s more affordable, convenient, and connected. “
Recent financial results
CVS total revenues for the first quarter ended March 31, 2023 were $85.28 billion, up 11% year-over-year. Adjusted operating profit decreased 5.1% year-on-year to $4.37 billion. Net cash provided by operating activities increased 108.8% year-on-year to $7.44 billion.
Adjusted net income decreased 6.9% year-on-year to $2.84 billion. Also, adjusted EPS for him was $2.20, representing a 4.3% decline year-over-year.
For the first quarter of the fiscal year ended March 31, 2023, MDVL’s total revenue was $620,000, up 134% year-over-year. Operating loss shrank 7.4% year-on-year to $5.01 million. The company’s adjusted EBITDA loss fell 17.1% year-on-year to $3.66 million. Additionally, net loss increased 33.1% year-over-year to $17.33 million. Loss from continuing operations narrowed slightly year-on-year to $0.16.
Expected financial performance
CVS’ 2023 EPS is expected to fall 0.6% year-on-year to $8.64, while revenue for the year is expected to rise 7.9% year-on-year to $347.9 billion. EPS is expected to grow 3.3% year-on-year to $8.92 in 2024, while sales in the same year are expected to fall 2.5% year-on-year to $339.05 billion.
MDVL’s EPS is expected to remain negative in 2023 and 2024. Sales in fiscal 2023 are expected to fall 93% year-on-year to $3.01 million. Sales in 2024 are expected to grow 128% year-on-year to $6.87 million.
Profitability
CVS’ revenue in the last 12 months is 7,591 times the revenue generated by MDVL. CVS is more profitable, with EBITDA margin and net income margin of 5.81% and 1.19%, respectively, compared to MDVL’s minus 94.51% and 119.46%. Also, CVS has an asset turnover ratio of 1.40x compared to MDVL’s 1.37x.
evaluation
In terms of future EV/sales, CVS is currently trading at 0.42x, 11.9% lower than MDVL at 0.47x. CVS has a 12-month price-to-sales ratio of 0.27, which is 48.1 percentage points lower than MDVL’s 0.40. Similarly, CVS has a price-to-book ratio of 1.21x over the last 12 months, compared to MDVL’s 4.30x.
Therefore, CVS is relatively affordable.
power rating
Overall CVS rating is B, which corresponds to our own rating of “Buy”. power rating system. On the other hand, the MDVL has an overall rating of D, which corresponds to selling. The POWR rating is calculated by considering 118 different factors, with each factor being optimally weighted.
Our proprietary rating system also evaluates each stock based on eight different categories. CVS has a value grade of B to match the discounted valuation. An overestimation of MDVL justifies an F grade of value.
Of the 5 brands of Medical – Drugstore CVS ranks first in the industry, while MDVL ranks last in the same industry.
In addition to the above, we also assessed both stocks for growth, momentum, stability, sentiment and quality. click here To view CVS ratings, get all MDVL ratings here.
The rapidly aging population and prevalence of chronic diseases are increasing the demand for prescription drugs. In addition, the Medicare prescription drug inflation rebate program reduces drug costs, thereby driving demand for prescription drugs at pharmacies. CVS has lowered its adjusted EPS forecast for this year, but is likely to benefit from strategic acquisitions. In addition, solid operating cash flow is expected to drive long-term growth.
Meanwhile, MDVL sold some assets of its SpotRx pharmacy services business to CVS to focus on its pharmacy technology business. The company leverages cost-cutting initiatives, revenue growth, and margin expansion to achieve break-even operating cash flow. However, it will take some time before the company becomes profitable.
Considering these factors, CVS may be a better choice than MDVL.
Our research shows that investing in stocks with an overall rating of ‘strong buy’ or ‘buy’ increases your odds of success.Medical – See all the top rated stocks in the Pharmacy industry here.
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CVS shares were trading at $67.64 a share Monday morning, down $0.03 (-0.04%). Year-to-date, the CVS is down -26.32%, while the benchmark S&P 500 Index is up 10.25% for the same period.
About the author: Dipanjan Benture
Dipanjan has been interested in the stock market since elementary school. This earned him a master’s degree in Finance and Accounting. Today, as an investment analyst and financial journalist, Dipanjan has a keen interest in reading and analyzing emerging trends in financial markets.
post CVS Health (CVS) vs. MedAvail Holdings (MDVL): Which Should You Buy? first appeared in stocknews.com