All the three major stock market indexes are on track to close the week higher. A solid start to the third-quarter earnings season has helped the indexes rally lately. According to FactSet, the third-quarter net profit margin for S&P 500 member companies is 12.3% higher than the 10.9% five-year average net profit margin.
However, an increase in the Consumer Price Index, continued supply chain disruptions, and the possibility of the Fed tightening its monetary policy in the near term could keep the market volatile in the near term. Therefore, we think it would be wise to scoop up the shares of fundamentally strong large-cap stocks because large-cap stocks are less sensitive to market volatility than mid-cap or small-cap stocks.
Quality large-cap stocks CVS Health Corporation (CVS), Dell Technologies Inc. (DELL), and Walgreens Boots Alliance, Inc. (WBA) are currently trading at discounts to their peers. So, it could be wise to bet on these stocks now.
CVS Health Corporation (CVS)
With a market capitalization of $114.62 billion, CVS in Woonsocket, R.I., is a health service company. It operates through four segments—Pharmacy Services; Retail/LTC; Health Care Benefits; and Corporate. Its segments offer a range of pharmacy benefit management (PBM) solutions, prescription drugs, a range of health products, and general merchandise. In addition, the company provides a range of traditional, voluntary, and consumer-directed health insurance products and related services.
This month, the Aetna Savings Plus Network and CVS will offer Aetna Connected Plan, which will deliver more affordable and unique healthcare in the Chicago market. The Plan will be accessible to the members at any place and at any time. According to both companies, this new healthcare model is more connected, convenient, and affordable for employers and members.
CVS’ operating income for the second quarter, ended June 30, 2021, came in at $4.33 billion. The company’s total revenues increased 11.1% year-over-year to $72.62 billion. Its net income amounted to $2.79 billion for the period. Also, the company’s EPS came in at $2.1.
Analysts expect CVS’ revenue to increase 5.6% year-over-year to $283.87 billion in its fiscal year 2021. Also, the company has an impressive earnings surprise history; it surpassed the consensus EPS estimates in each of the trailing four quarters. In addition, its EPS is expected to increase 20% in the next quarter. Also, the stock has gained 17.3% in price over the past nine months and 46.7% over the past year.
In terms of forward EV/Sales, CVS is currently trading at 0.65x, which is 90.6% lower than the 6.93x industry average. Also, in terms of its forward non-GAAP P/E, the stock is currently trading at 11.15x, which is 50.1% lower than the 22.33x industry average.
CVS’ strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, which equates to a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.
Also, the stock has a B grade for Value, Growth, and Stability. We’ve also graded CVS for Sentiment, Momentum, and Quality. Click here to access all of CVS’ ratings. CVS is ranked #1 of 6 stocks in the Medical – Drug Stores industry.
Dell Technologies Inc. (DELL)
An information and technology solutions company, DELL, has a market capitalization of $86.44 billion. Infrastructure Solutions Group (ISG); Client Solutions Group (CSG); and VMware are the three operational segments of the Round Rock, Tex.-based company. Its segments offer a wide range of products and services, including digital transformation, hardware and software peripherals, hybrid and multi-cloud applications, and digital workspaces.
This month, DELL unveiled edge innovations to help organizations deploy and capture more value across its infrastructure and PC portfolio. Through these innovative simple solutions, organizations can analyze data closer to where it’s created, make faster decisions, improve outcomes, and drive progress.
For its fiscal second quarter, ended July 30, 2021, DELL’s total net revenue increased 14.9% year-over-year to $26.12 billion. The company’s operating income grew 20.8% from its year-ago value to $1.37 billion. Its adjusted EBITDA rose 7.5% from the prior-year quarter to $3.33 billion. In addition, the company’s net income came in at $880 million during the period.
DELL’s revenue is expected to increase 12.6% year-over-year to $106.29 billion in its fiscal year 2022. In addition, the company has an impressive earnings surprise history; it beat the consensus EPS estimates in each of the trailing four quarters. Furthermore, its EPS is expected to increase by 16.9% in the current year. Over the past nine months, the stock has soared 46.9% in price. Also, the stock has returned 61.8% over the past year.
In terms of forward EV/EBITDA, DELL is currently trading at 8.94x, which is 44.4% lower than the 16.07x industry average. In addition, its 10.89x forward EV/EBIT is 45.9% lower than the 20.14x industry average.
DELL’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, which equates to a Buy in our proprietary rating system. Also, the stock has a B grade for Growth and Value.
In addition to the POWR Rating grades I’ve just highlighted, one can see DELL’s ratings for Stability, Sentiment, Momentum, and Quality here. DELL is ranked #11 of 50 stocks in the B-rated Technology – Hardware industry.
Walgreens Boots Alliance, Inc. (WBA)
WBA is a retail pharmacy that provides medicines and accessible and high-quality care. The company operates through two segments—the United States; and International. Its segments include the operation of retail drugstores, care clinics, specialty pharmacy services, beauty retail businesses, and optical practices. WBA, which is headquartered in Deerfield, Ill., has a $42.54 billion market capitalization of.
This month, WBA unveiled a new consumer-centric healthcare strategy to help it achieve long-term profitability. The strategy includes establishing Walgreens Health, a new business division made possible by investments in VillageMD and CareCentrix that will help the company expand its primary care, post-acute care, and home care capabilities.
WBA’s sales increased 12.8% year-over-year to $34.26 billion for its fiscal fourth quarter, ended August 31, 2021. The company’s gross profit grew 18.6% from its year-ago value to $7.5 billion. Its operating income rose 49.7% from the prior-year quarter to $910 million. Also, the company’s net earnings increased 72.2% year-over-year to $613 million.
For its fiscal year 2023, analysts expect WBA’s revenue to increase 4.3% year-over-year to $136.8 billion. It has surpassed the consensus EPS estimates in each of the trailing four quarters. The company’s EPS is estimated to increase 5.1% next year. The stock has gained 5.3% in price over the past three months and 31.4% over the past year.
In terms of forward EV/Sales, WBA is currently trading at 0.57x, which is 71.5% lower than the 1.99x industry average. Also, in terms of its forward Price/Sales, the stock is currently trading at 0.32x, which is 78.1% lower than the 1.45x industry average.
It’s no surprise that WBA has an overall B rating, which equates to a Buy in our POWR Rating system. Also, the stock has a B grade for Growth and Value.
Click here to see the additional POWR Ratings for WBA (Stability, Quality, Momentum, and Sentiment). In the same industry, WBA is ranked #2 in the Medical – Drug Stores industry.
CVS shares were trading at $86.41 per share on Friday morning, down $0.45 (-0.52%). Year-to-date, CVS has gained 29.72%, versus a 21.94% rise in the benchmark S&P 500 index during the same period.
About the Author: Priyanka Mandal
Priyanka is a passionate investment analyst and financial journalist. After earning a master's degree in economics, her interest in financial markets motivated her to begin her career in investment research.3 Large-Cap Value Stocks to Buy This Month appeared first on StockNews.com