CVS Bay Area Inc. (2687) AI Stock Analysis

• Market Cap: ¥2.50B
• Dividend Yield: 4.73%
• Average Volume (3M): 6.05K
• Price to Earnings (P/E): 14.2
• Beta (1Y): 0.54
• Revenue Growth: 2.93%
• EPS Growth: -81.08%
• Country: JP
• Employees: 202
• Sector: Consumer Defensive
• Sector Strength: 42
• Industry: Grocery Stores
• EPS (TTM): 7.83
• Shares Outstanding: 5,064,000
• 10 Day Avg. Volume: 4,010
• 30 Day Avg. Volume: 6,050
• PEG Ratio: 0.04
• Price to Book (P/B): 0.61
• Price to Sales (P/S): 0.34
• P/FCF Ratio: -2.48
• Enterprise Value/Market Cap: N/A
• Enterprise Value/Revenue: N/A
• Enterprise Value/Gross Profit: N/A
• Enterprise Value/Ebitda: N/A
• 1Y Price Target: N/A
• Price Target Upside: N/A
• Rating Consensus: N/A
• Number of Analyst Covering: 0
• EPS Forecast (FY): N/A
• Revenue Forecast (FY): N/A

• Rating: 79 Outperform
• Price Target: ¥584.00 ▲(15.42% Upside)
• Action: N/A Date: 07/28/25
• Date: Action: N/A 07/28/25

CVS Bay Area Inc. scores well due to strong financial performance and attractive valuation. The company's recovery in profitability and stable balance sheet are significant strengths. Technical indicators suggest stable momentum with potential for growth. However, challenges in cash flow management and debt levels require careful monitoring.

Positive Factors

Revenue & Margin Recovery

Improving top-line growth and materially higher gross and net margins indicate the company has tightened cost structure and/or improved pricing. Sustained margin expansion supports internal funding for reinvestment, strengthens earnings durability, and enhances resilience through business cycles.

Strong ROE & Equity Base

A materially improved ROE and a solid equity ratio signal efficient capital allocation and a meaningful shareholder capital buffer. Durable capital returns and a reasonable equity base support scalable growth without immediate dilution and improve long-term financial flexibility.

Diversified Healthcare Revenue Streams

A multi-pronged business model—retail pharmacies, PBM, managed care and insurance—creates recurring revenue, cross-sell opportunities and lower customer churn. Structural diversification reduces reliance on any single channel and supports steadier cash flows over economic cycles.

Negative Factors

Negative Free Cash Flow

Persistent negative free cash flow and weak cash conversion mean earnings are not yet translating into available cash. This constrains capacity for debt reduction, dividends, or capex without external financing, increasing long-term financing and execution risk if not remedied.

Moderate Leverage

A D/E above 1.0 signals meaningful reliance on debt financing. Elevated leverage reduces flexibility to invest or absorb shocks, raises interest expense sensitivity, and can pressure margins or force asset sales if cash flow weakness persists or rates rise.

Earnings Volatility / EPS Decline

Extremely negative EPS growth and historical bouts of net losses point to earnings volatility and execution risk. Unpredictable profitability complicates long-term planning, investor confidence, and capital allocation, making consistent reinvestment and deleveraging harder.

CVS Bay Area Inc. Business Overview & Revenue Model

Company Description

CVS Bay Area Inc. operates convenience stores under the Lawson brand in Japan. The company also operates hotels under the BAY HOTEL brand name. In addition, it provides various manned front desk and reception/office butler services for companies at condominiums; and cleaning services at convenience stores and condominiums, as well as uniform handles management services for corporations. The company operates 7 convenience stores and 8 hotels. CVS Bay Area Inc. was founded in 1981 and is headquartered in Chiba, Japan.

How the Company Makes Money

CVS Bay Area Inc. generates revenue through multiple streams including the sale of prescription medications, over-the-counter products, and health-related services in its retail pharmacies. A significant portion of its income comes from pharmacy benefit management (PBM) services, where the company manages prescription drug benefits for health plans and employers. Additionally, CVS Bay Area Inc. earns revenue from health insurance premiums and managed care programs. Partnerships with pharmaceutical companies, healthcare providers, and insurance organizations contribute to its earnings by enabling the company to offer integrated healthcare solutions, while also driving customer traffic to its retail locations.

CVS Bay Area Inc. Financial Statement Overview

Summary

CVS Bay Area Inc. has shown strong recovery in its income statement with significant revenue growth and improved profit margins. The balance sheet is stable with moderate leverage, but cash flow management remains a challenge with negative free cash flow. Overall, the company is on a positive trajectory, but attention to debt and cash flow is crucial.

Income Statement

CVS Bay Area Inc. has demonstrated a strong recovery in its income statement metrics. The company achieved a significant revenue growth rate of 4.03% from 2024 to 2025. Gross profit margin improved to 44.67%, and net profit margin increased to 14.36%, indicating enhanced profitability. The EBIT margin is at 5.39%, and EBITDA margin at 18.06%, reflecting operational efficiency. However, the company faced challenges in previous years with negative net income, which has been successfully turned around.

Balance Sheet

The balance sheet shows a stable financial position with a debt-to-equity ratio of 1.21, indicating moderate leverage. Return on equity improved significantly to 25.65%, showcasing effective use of equity capital. The equity ratio stands at 38.87%, reflecting a solid equity base. Despite the positive trajectory, the company still carries a substantial amount of debt, which could pose risks if not managed carefully.

Cash Flow

Cash flow analysis reveals some challenges, with a negative free cash flow of -1.08 billion in 2025. The operating cash flow to net income ratio is 0.37, indicating that cash generation from operations is not fully supporting net income. However, the company has shown resilience by improving its operating cash flow over the years. Continued focus on cash flow management is essential to sustain growth.

Breakdown	TTM	Feb 2025	Feb 2024	Feb 2023	Feb 2022	Feb 2021
Income Statement
Total Revenue	7.90B	7.82B	7.52B	6.93B	7.21B	7.32B
Gross Profit	3.60B	3.49B	3.28B	2.73B	2.28B	1.97B
EBITDA	406.67M	1.41B	613.34M	195.64M	-618.08M	-999.78M
Net Income	241.80M	1.12B	697.62M	-13.53M	-831.52M	-1.16B
Balance Sheet
Total Assets	11.54B	11.27B	10.28B	8.68B	9.41B	10.51B
Cash, Cash Equivalents and Short-Term Investments	1.85B	1.78B	1.89B	1.77B	1.73B	1.94B
Total Debt	5.74B	5.29B	5.32B	4.48B	4.85B	4.88B
Total Liabilities	7.29B	6.89B	6.92B	5.94B	6.57B	6.79B
Stockholders Equity	4.25B	4.38B	3.36B	2.74B	2.83B	3.72B
Cash Flow
Free Cash Flow	0.00	-1.08B	-644.17M	-201.00M	-425.39M	-577.34M
Operating Cash Flow	0.00	410.52M	481.89M	-172.53M	-351.39M	120.76M
Investing Cash Flow	0.00	-384.36M	-1.08B	654.76M	232.76M	-341.04M
Financing Cash Flow	0.00	-129.65M	710.97M	-442.98M	-84.74M	550.89M

CVS Bay Area Inc. Technical Analysis

• Technical Analysis Sentiment: Negative
• Last Price: 506.00
• 50DMA: Positive
• 100DMA: Negative
• 200DMA: Negative
• MACD: Positive
• RSI: Neutral
• STOCH: Positive

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For JP:2687, the sentiment is Negative. The current price of 506 is below the 20-day moving average (MA) of 509.09, above the 50-day MA of 504.27, and below the 200-day MA of 541.32, indicating a neutral trend. The MACD of 1.64 indicates Positive momentum. The RSI at 45.59 is Neutral, neither overbought nor oversold. The STOCH value of -1.30 is Positive, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for JP:2687.

CVS Bay Area Inc. Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
2687	79 Outperform	¥2.50B	14.21	―	4.73%	2.93%	-81.08%
8198	78 Outperform	¥119.81B	10.89	―	1.92%	2.30%	26.52%
7508	76 Outperform	¥66.77B	12.60	―	2.85%	11.38%	4.28%
3539	75 Outperform	¥88.21B	13.97	―	0.70%	8.48%	26.56%
8194	72 Outperform	¥235.24B	13.04	―	2.43%	4.48%	13.17%
7596	66 Neutral	¥32.62B	22.69	―	2.22%	7.94%	-8.55%
Sector *	62 Neutral	$20.33B	14.63	-3.31%	3.23%	1.93%	-12.26%