CVS Health

CVS pulled in 402 billion dollars in revenue last year, growing nearly 8 percent, while adjusted earnings per share jumped 24 percent to 6.75 dollars. Management is guiding for mid-teens earnings growth all the way through 2028, and operating cash flow climbed to over 10 billion dollars. The Aetna insurance arm has gone from bleeding cash to generating real profit again.

CVS trades at roughly 10 times forward earnings, well below most healthcare peers that sit closer to 14 times. Investors also collect a 3.7 percent dividend yield, which is comfortably covered with only about 43 percent of free cash flow going out the door. Over 81 percent of Aetna's Medicare Advantage members are now in 4-star or higher rated plans, setting up bigger bonus payments in 2026.

Net margins sit at just 0.72 percent, meaning CVS keeps less than a penny from every dollar of revenue. The pharmacy business faces relentless pressure from Amazon and Walmart, and any small bump in medical costs or pharmacy reimbursements can swing profits dramatically. There is very little room for error in a business this big and this thin.

About 26 percent of CVS revenue comes from government programs, mostly Medicare Advantage and Part D. The initial 2027 Medicare rate proposal came in at a near-flat 0.09 percent before being revised up to 2.48 percent, still below the 5.06 percent locked in for 2026. Policy shifts out of Washington can move this stock sharply overnight, and the rate environment remains the single biggest swing factor.