2 Stocks That Are Much Cheaper Than They Look

Simply looking at earnings numbers and multiples can be misleading if you're looking at stocks to buy. That's because a company can have an unusually strong or weak quarter that impacts its multiples, and in the process, it can end up looking much cheaper or more expensive than it otherwise would be. It's one of the dangers of relying solely on multiples when scanning and searching for stocks.

A couple of stocks that are much cheaper than they might initially look are AbbVie (NYSE: ABBV) and CVS Health (NYSE: CVS). While at first glance these stocks may appear to be expensive and trading at high earnings multiples, a closer look reveals that they can actually end up being bargain buys.

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AbbVie

Healthcare giant AbbVie trades at a seemingly expensive price-to-earnings (P/E) multiple of more than 100. Thus, it may not be all that surprising to see that the stock has risen by just 14% over the past 12 months, as investors may have avoided the stock due to that high multiple. By comparison, the S&P 500 has risen by about 24% during that stretch.

The problem for AbbVie stems from a particularly poor quarter where its net income was much lower than usual. For the period ending Sept. 30, 2025, AbbVie reported net earnings of $188 million, versus nearly $1.6 billion in profit in the prior-year period. The reason for the sizable drop is that the company incurred a $2.7 billion charge for acquired in-process research and development costs. These are expenses related to acquisitions and aren't recurring in nature.

For AbbVie, which has been involved in many acquisitions over the years, these types of expenses can drastically impact earnings, and when that happens, its P/E multiple increases sharply since the denominator becomes smaller. However, when looking at its forward P/E multiple of 15, the stock appears to be a much better buy, as that factors in analyst expectations of how it will do in the future. It can be a better indicator of what the company's normal earnings will be.

AbbVie is a top pharmaceutical stock that has generated nearly $63 billion in revenue over the past four quarters and offers investors an attractive yield of 3.3%. It can be an excellent stock to own, but for investors who may be relying on just the trailing P/E multiple, it can be easy to overlook the stock due to its seemingly high valuation.

CVS Health

Another stock that looks much more expensive than it is right now is CVS Health. Its trailing P/E multiple is 42, but its forward P/E drops to just 13. A glaring reason for the inflated high earnings multiple is that a couple of quarters ago, the company reported a net loss of just under $4 billion. With that loss impacting its earnings over the past four quarters, its P/E multiple becomes much higher.

The reason for that big loss was due to a non-recurring item: goodwill impairment totaling $5.7 billion. This charge also came during the quarter ending Sept. 30, 2025, and was related to the company's health services segment. Without that expense, CVS Health stock would look much cheaper than it is today. At a forward P/E of 13, it's another example of a stock that is a much better buy than how it appears when looking at the trailing P/E multiple.

CVS has been posting stronger results of late as medical costs have been coming down. Its medical benefits ratio for the first quarter of 2026 was 84.6%, compared with 87.3% in the prior-year period. This is a good sign that costs are coming down, and as a result of this, analysts may also end up upgrading their outlooks for the stock, which can be another reason the forward P/E becomes much lower -- because of the expected improvement in the bottom line over the coming year.

CVS is a diversified healthcare company with strong fundamentals, making it a potentially great option for investors who want broad exposure to the healthcare sector. It also yields 2.8%, which adds some extra incentive to buy and hold. The S&P 500 average yield is just 1.1%.

Earnings multiples can be useful in comparing stocks, but it's also important to understand their shortfalls. Relying too heavily on the trailing P/E, for instance, could result in you easily looking past these two terrific blue chip dividend stocks.

David Jagielski, CPA has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends AbbVie. The Motley Fool recommends CVS Health. The Motley Fool has a disclosure policy.