Is it time to buy this market-beaten growth stock?

Investing is a complex game, but the aim is simple: Profit. Despite there being numerous avenues through which this objective can be achieved, many concentrate on short-term price movement and growth.

For those adopting a more patient strategy, certain stocks seem to offer potential for consistent long-term returns.

As Warren Buffett famously said: “If you aren’t willing to own a stock for 10 years, don’t even think about owning it for 10 minutes.” CVS Health (NASDAQ: CVS) might be one such stock, offering potential long-term value.

CVS strong fundamentals

CVS, often perceived as a stable and unexciting stock, is undergoing a transformation that could position it as a healthcare giant with substantial growth potential. 

The company has extended its reach into pharmacy benefits management and health insurance through strategic acquisitions, such as Signify Health (NYSE: SGFY) and Oak Street Health (NASDAQ: OSH). 

These acquisitions indicate CVS’s deliberate efforts to diversify its services and establish a more comprehensive presence in the healthcare industry.

However, these acquisitions could initially impact stock prices due to investment uncertainty, and the recent $10.6 billion investment in Oak Street Health and $8 billion in Signify Health could have played a role in the decline of the stock price.

CVS’s stock is presently trading just above the $64 support level, and it boasts an annual dividend yield of 3.65%.  

Despite being within its 52-week low, the company released a robust Q3 earning report earlier this month. Given these factors, the current price may present a favorable opportunity to consider buying the stock. 

Analysts prediction 

The aging US population, which will drive increased healthcare, offers the potential for stronger CVS future performance.

If it can achieve an average total return of 13% over the next 25 years, it has the potential to make investors wealthy. This projection suggests that an investment of around $48,000, with the assumed growth rate and a 25-year holding period, could potentially reach $1 million. While there are no guarantees in the world of investing, CVS holds promise as a potential path to wealth creation.

Projections from 15 analysts on TipRanks over the previous quarter indicate a 12-month average price target of $87.20 for CVS.

This suggests a potential upside of almost 26% from its current price $69.32, leading to an overarching ‘Strong Buy’ recommendation. Based on the last three months’ rating, CVS has received 12 ‘Buy’ ratings, 3 ‘Hold’ ratings, and notably 0 ‘Sell’ ratings.

The highest price target for the stock is $102, meanwhile, the lowest price target is $76, still above the current price of almost $70. 

CVS faces challenges such as the health benefits segment seeing the biggest year-over-year decline in earnings, with its operating income falling by 20% to $1.5 billion. 

Also a drop in COVID-related vaccinations and testing, resulting in adjusted operating income from its pharmacy and consumer wellness segment declined by 17% to just over $1.4 billion. 

Nevertheless, the potential for recovery and growth remains a point of interest for investors.

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Disclaimer: The content on this site should not be considered investment advice. Investing is speculative. When investing, your capital is at risk.