Consumers know CVS Health (CVS -0.22%) for its pharmacy retail stores, but the overall company is much larger than that business. In addition to a pharmacy benefits business, CVS also has a health insurance operation in Aetna, which it acquired years ago. And CVS has acquired other companies since then.

So how might CVS look in five years, and is it worth investing in the business today?

Could CVS become the next big healthcare company?

CVS Health isn't content with the status quo -- that much is evident. Recently, it closed on a couple of key acquisitions. In March, it purchased home health company Signify Health for $7.8 billion. And in May, it completed its acquisition of value-based primary care operator Oak Street Health for $10.6 billion. Oak Street works with 600 primary care providers and has a presence in 21 states.

For now, CVS says its focus will be on integrating these businesses into its operations, pausing merger and acquisition (M&A) activity for the time being.

What CVS has demonstrated through these recent acquisitions are a couple of things. The first is that it isn't shy about making a big transaction to help transform itself. Second, its focus appears to be on becoming a broader healthcare business, with value-based care being a key priority.

One of the reasons it wouldn't surprise me to see more M&A activity from CVS is that it generates strong free cash flow, normally in excess of $10 billion each year. And with a dividend that costs around $3 billion annually, there's room for CVS to use some of that cash to fund more acquisitions, which appear to be a key part of its growth strategy.

Five years from now, I would expect to see more acquisitions from CVS that further complement the moves it has already made, perhaps being a bigger player in value-based care and competing with rival Walgreens Boots Alliance in primary care, as that has been a focus for both companies lately.

And with CVS having the resources and appetite to pursue more growth, investors shouldn't expect it to slow down anytime soon.

Could the stock become a better investment?

Over the past decade, shares of CVS Health have only risen by a relatively modest 45% when including its dividend. That may not sound bad, but consider that the S&P 500 has generated a total return of 228% over that same time frame; investors would have been much better off going with the broad index than the single healthcare stock.  

The big question for investors is whether it's realistic to expect that trend will change over the next five years. There are a few reasons why CVS Health could become a better investment in the years ahead, including:

  • A low valuation. Its forward price-to-earnings multiple of just 8 gives investors a solid margin of safety in the event the business doesn't perform so well. The average healthcare stock trades at a multiple of 18. 
  • A broader business model. With more segments and growth opportunities for CVS to pursue, the company's top and bottom lines could see significant improvement. 
  • An increased need for healthcare. A diversified healthcare company such as CVS Health could be in a great position to meet consumer needs.

Whether it's the effects of long COVID or simply an aging population and more seniors requiring constant, ongoing care, CVS has a stronger healthcare business moving forward to meet those needs.

Should you buy shares of CVS Health today?

It's tempting to think that CVS hasn't been a good buy in recent years, so why should the future be any different? But the moves that the company has been making could very well pay off for investors in the long run.

CVS has strong fundamentals today, and with a more diverse business moving forward, it should be in a better position to succeed. If it fails, then I suspect it would be due to execution, because all the tools are there for the company to be a much bigger name in healthcare over the next several years.

Its track record hasn't been great, but the need for healthcare is only going to rise in the future as the U.S. demographics shift and there are more seniors. Plus, chronic conditions such as diabetes are only going to become more prevalent as well.

All in all, CVS is putting itself in an excellent position to meet the needs of its customers. And at a low valuation, the stock is almost a no-brainer buy at this point.