|Shares Out. (in M):||1,308||P/E||7.7||7.1|
|Market Cap (in $M):||68,487||P/FCF||9.2||6.6|
|Net Debt (in $M):||70,206||EBIT||14,994||15,616|
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CVS is down 33% since it was last written up on VIC (1/8/2018) due to a number of temporary as well as long-term issues/concerns, and we now have the opportunity to buy a high-quality vertically-integrated business at a substantial discount to intrinsic value. CVS is now trading at <8x 2019E and ~7x 2020E ADJ EPS. We believe some of the 2019 issues should subside (prove to be a trough year) and should improve performance in 2020 and beyond. At 10.5-12.0x 2020E EPS it would be worth $78-90 = 50-70% upside.
Causes of Lower than Expected 2019 Guidance:
Catalysts: There are no real catalysts upcoming, which is likely one of the main reasons for the continued selloff the past couple weeks in the face of weak guidance and headline risks. But the following should drive the stock substantially higher over the next 1-2 years:
Investor Day in June: LT Guidance/roadmap/visibility into business.
Improved Performance/2020 Guidance
Continued Debt Paydown
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