CVS Caremark Corp. (CVS) is a pharmacy benefit management company that also operates retail pharmaceutical stores in the <st1:country-region w:st="on"> <st1:place w:st="on"> United States </st1:place> </st1:country-region> . It has over 6000 retail drugstores in the country. <o:p> </o:p>
There is a lot of good stuff happening at CVS, which is why its stock has been faring well. Its purchase of Caremark has been handled wonderfully and contributed to an 84% increase in first-quarter profits. Revenues also jumped 61%. The pharmacy benefit management business is relatively resistant to a weaker economy, which has helped the stock. <o:p> </o:p>
Management has shown it is shareholder friendly, most recently by the announcement that it is buying back $2 billion in stock. The shares will be purchased both this year and next depending on conditions in the stock market. <o:p> </o:p>
In more good news, ratings agency Moody’s upgraded its outlook on CVS to “positive” from “stable”. Credit metrics are expected to continue their improvement and debt will be further paid down due to increasing cash flow and earnings growth. <o:p> </o:p>
<o:p> </o:p> CVS has made it a habit of beating the Street. It has done so by an average of 3.5% over the past four quarters. The valuation looks attractive with a PEG ratio of 1.1x. It is also trading at a meager 0.72x sales. If current trends continue, this could easily be a $50 stock within 18 months. <o:p> </o:p>
$42.169 (06/10/08)
