CVS, purchase of Aetna, possible Amazon entry into prescriptions, and for various other reasons the stock from $115 in 2015 steadily declined to $52 in 2019. CVS through all this continued to execute, made management changes, found a way to integrate Aetna, and introduced in-store clinics, etc.
The stock tested that low 50’s bottom in early 2019 and late 2020.
Now the stock is above $100, From early 2019, march 2020 and Nov 2020. Investors had multiple opportunity to get in at the bottom price. Any how CVS is expected to produce $10 B FCF (after paying $2 dividend), so they can pay down their debt (they already reduced it from $75 B to $58 B) and buyback stock and invest in the business. That is, in the next 3 years they can easily produce over $30 B FCF and should have over $10 B for buybacks, and $10 B for reducing the debt and $10 B for M&A and other investments.
The dividend yield has gone down to 2% due to price appreciation, but I think the stock has potential to provide 10% to 15% CAGR return over next 3 years. If they don’t do any M&A, they can reduce debt and buyback more. Most of their investment cycle is over and only maintenance cap-ex is expected.