Found in Lowell, Massachusetts in 1963, CVS Pharmacy, which is usually shorten as CVS, is now the second largest pharmacy chain in the United States, with over 7,000 stores throughout the nation. Not limited with pharmacy chain industry, CVS sells prescription drugs and over-the-counter drugs as well as a wide assortment of general merchandise, such as beauty products and cosmetics, seasonal merchandise, greeting cards and convenience foods. (http://en.wikipedia.org/wiki/CVS_Pharmacy) Thus typically, CVS is of retail industry, which ranks fifth in US retail industry in 2011, with first three ranks of Wal-Mart, General Motors, and Ford (http://retailindustry.about.com/od/topusretailcompanies/a/2011-Retail-Fortune-500-Rankings-2008-2009-2010-Comparisons.htm).

I took balance sheet and income statement and ratio [Exhibit 1] from different websites, so they may have slight differences due to varies accountants’ preference. However, each of them should present a correct tendency.

To analyze their financial development, I first took a look at their balance sheet. Starting with asset account, the first thing caught my attention was that despite the economy recession during 2008 to 2011, CVS presented a constant increase in both current asset and total asset, and seems the recession had no influence on the company. Then I noticed the large increase in long-term asset in 2008, due to the special background, I curiously researched for CVS’s history activity in that year, and learnt they acquired Standalone Drug Business, which has significant impacts both in company’s balance sheet and income statements (http://info.cvscaremark.com/newsroom/press-releases/cvs-caremark-reports-record-second-quarter-revenues-operating-profit-and-ear). Consequently, it influenced the following liability account directly. Their current liabilities increased dramatically in 2008 which I thought would be a result of acquiring Standalone Drug. Besides, they somehow managed to control the debt growth by lower the long-term debt thus controlled the total liability. Their common equity and retained earnings also increased steadily in the past five years, and didn’t stop investment and future development. To this point, I’m assumed that CVS is one of the companies that too busy to be busy and didn’t notice the recession. (http://www.marketwatch.com/investing/stock/cvs/financials/balance-sheet)

However, I changed my opinion after seeing income statement. CVS performed pretty well from 2007 to 2009, especially in 2008 after they acquired Long Drug Business, and all of a sudden suffered a negative growth rate in sales revenue, gross income as well as net income. I was surprised and did some research then suddenly realized that CVS, as a retail pharmacy industry, should be easily influenced by customers’ purchasing ability (http://www.pbn.com/CVS-shows-2Q-revenue-profit-decline-as-recession-cuts-into-consumer-spending,51440). The reason why they kept their increasing rate on revenue over the previous darkest period was the constant enlargement of their business during the recession. However in 2010, CVS seemed did not take big decisions which, cooperated with economic down background, tugging their increasing rate. CVS is a well- managed company and react quickly to the situation, and consequently, they had a CEO alternation in March, 2011(http://www.forbes.com/2011/03/01/people-moves-cvs-caremark-phh-marketnewsvideo.html). CEO change may had varies reasons, nevertheless, the company recovered the sales revenue, and even their net income rate still lower than before, they are recovering and above, keep making profit. (http://www.marketwatch.com/investing/stock/cvs/financials)

Data themselves cannot tell the whole story, so then I took a look at ratios to get more on the company. Among all the ratios, there were 4 occurred noticeable decreases and 1 fluctuates at a relevantly stable level. To analyze the ratios, I will start with liability ratios. Their current ratio was always safely above 1 and kept increasing. However they had quick ratios less than 1 for over five years, and may because of their income structure, which is the same as Wal-Mart, receiving cash in 1 or 2 business days, in addition, the ratio increased over years, thus wouldn’t be a big problem. Second were the asset management ratios, it actually lowered in 2010, and soon recovered in 2011 by control inventory purchasing or usage. DSO decreased a lot in 2011, which means CVS receive their money quicker than past. Then they had a relatively stable debt to equity ratio, which presented a well management on debt and debt- equity relationship. As shown in balance sheet, year 2011 had a large long-term debt and perceived as the company using leverage to budget the capital and adjust stock price. Another thing need to be noticed was all of their profitability ratios show a decrease or fluctuated trend. This should not be a happy thing for CVS; it means they really have to pay attention to their expenses and cost of good sold in proportion to sales revenue. Yet, this didn’t influence on public’s view on CVS, and their stock price kept rising thus caused raising market value ratios. (http://99wallstreet.com/v2/report.php?type=ratios&t=CVS)

To evaluate the whole company, corporation governance aspect must be included; it seems that CVS had an independent board of director with clear guidelines listed to better serve the customers (http://investor.cvs.com/phoenix.zhtml?c=99533&p=irol-govGuidelines). Up to now, there were not scandals or disputes on board of directors’ dependency, thus I would comprehend it as clear and trustful governance and aimed at maximizing stockholder’s profit.

For forecasting and current period assessing, I would expect CVS keep on their good management on debt and come up with new policy for controlling exceeded expense. For sure, since the impact on economic recession has reduced, customers recovered purchasing ability and being optimistic on the market, CVS will have greater development. As the official presentation report for quarter 1, 2012 indicated, CVS jumped really far from the same period of last year. They made new investments and expecting a good harvest for this year and the following few years. And for stock holders’ profitability, CVS determined to increased dividend this year, and would definitely pleased majority of the stockholder to be more satisfied and attract more stockholders for the business. (http://media.corporate-ir.net/media_files/irol/99/99533/Q112/Q1_2012_Earnings_Presentation_Slides.pdf)

In addition, CVS’s stock price rose from 28.45 dollars per share all the way to 41.14 dollars per share in 2011, and stands 45.39 dollars per share currently (http://www.stocknod.com/CVS-CVS-Caremark-stock-prices.aspx). Although it changes within a year, the overall tendency would always coordinated with the public expectancy and continue to increase. In addition, according to a rating involves 18 analysts, there were 13 analysts voted for strong buy, 2 for moderate buy and 3 for hold (http://investing.money.msn.com/investments/analyst-ratings/?symbol=CVS), together with all the data and analyze done above, I would also highly recommend buying in CVS stock for investment

Exhibit 1

 (http://99wallstreet.com/v2/report.php?type=ratios&t=CVS)