Many of the greatest investors of all time could be considered value investors. A value investing strategy centers around buying stocks at less than their fair value -- often much less.

One stock that seems to be greatly undervalued right now is pharmacy chain and health insurer CVS Health (CVS 1.36%). Let's take a peek under the hood at its fundamentals and valuation to better understand why the stock could be a no-brainer buy for value investors this month and beyond.

CVS Health is a crucial healthcare company

CVS Health is so massive in scope that it serves 100 million people each year -- approximately 1 in 3 Americans -- in at least some capacity. This includes not only its retail stores but also its Caremark business, which manages prescriptions, and its Aetna business, which provides health insurance to members.

Segment Q1 2022 Revenue Q1 2023 Revenue Growth (YOY)
Health care benefits $23.1 billion $25.9 billion 12.1%
Health services $39.6 billion $44.6 billion 12.6%
Pharmacy & consumer wellness $25.9 billion $27.9 billion 7.8%

Data source: CVS Health Q1 2023 earnings press release. YOY = year over year.

CVS Health's services were again in high demand during the first quarter, which ended March 31. The company's total revenue surged 11% higher over the year-ago period to $85.3 billion for the quarter. This strong performance was driven by across-the-board growth in each of its three segments.

The healthcare benefits segment, which offers medical, pharmacy, and dental insurance plans to customers, delivered double-digit top-line growth in the first quarter. Thanks to organic growth in demand for health insurance plans, the company's medical membership rose by 4.1% year over year to 25.5 million during the quarter. Coupled with increased premium rates, this explains the healthy revenue growth rate for the quarter.

The health services segment, which provides healthcare services via its medical clinics and pharmacy benefit management services, also generated double-digit revenue growth in the first quarter. Pharmacy claims processed grew during the quarter by 3.7% over the year-ago period to 587.3 million. Growth in more expensive pharmacy products was favorable to the company's revenue mix, which is how total revenue growth exceeded growth in pharmacy claims processed for the quarter.

Finally, the pharmacy and consumer wellness segment, which fills prescriptions and sells health and wellness products along with general merchandise, logged high-single-digit revenue growth in the first quarter. Prescription volume inched 2.5% higher year over year to 404.8 million during the quarter. Combined with more store traffic, this fueled revenue growth for the quarter.

CVS' non-GAAP (adjusted) diluted earnings per share (EPS) fell 4.3% over the year-ago period to $2.20 in the first quarter. The company's total operating expenses rose at a faster clip (11.7%) than revenue, which caused non-GAAP net margin to contract during the quarter by 60 basis points to 3.3%. This drop-off in profitability couldn't be offset by a decline in share count, so adjusted diluted EPS growth lagged revenue growth for the quarter.

As CVS Health rightsizes itself with cost-saving measures and continues to grow in medical membership, it should keep growing. Analysts believe the company's adjusted diluted EPS will rise by 4% annually over the next five years.

A customer shops at a pharmacy.

Image source: Getty Images.

The payout is well-covered

At more than double the 1.7% dividend yield of the S&P 500 index, CVS Health's current 3.5% yield may stand out to income investors. Up until recently, the company's payout was frozen for several years following its acquisition of Aetna. But that didn't stop the dividend from soaring 169% in the past 10 years.

CVS Health is clearly a company that has prioritized shareholders as it has reshaped itself into a healthcare juggernaut. Considering that the dividend payout ratio is expected to come in around 28% in 2023, I would expect annual dividend growth in the mid- to upper single digits.

A bargain-bin valuation

Despite its steady fundamentals, CVS Health's stock has performed poorly in recent months. The stock currently sits 36% off its 52-week high and just 1% off its 52-week low. This has pushed its forward price-to-earnings (P/E) ratio down to a measly 7.8. That's well below the 13.4 average for the healthcare plans industry. This drastically discounted valuation explains why analysts have an average 12-month share-price target of $101, which would be a staggering 50% upside from the current $69 share price.