CVS (NYSE:CVS) stock been caught in a downtrend over the past four years as the retail pharmacy giant has struggled to grow in a stagnant yet exceptionally competitive consumer pharmacy market. The result is that, while the S&P 500 has rallied 40% since the summer of 2016, CVS Health stock has dropped more than 40% during that same stretch.

The company’s outlook at this point does justify some of the weakness of CVS stock. The company isn’t growing very fast, nor has it grown very quickly for several years. A major threat from Amazon (NASDAQ:AMZN)  is looming just around the corner, and there is reason to believe that Amazon will do to the consumer pharmacy space what it did to the retail space. That’s not good news for CVS Health stock. Further, legislation could push drug prices lower, and that would  put pressure on CVS’ already depressed margins . The company’s  huge and growing debt load is worrisome.

So CVS is a low-growth, low-margin, heavily-indebted company that’s facing some sizable operational risks. That’s a bad combination, which explains the 40%-plus drop in CVS since the summer of 2016.

But, at current levels, CVS Health stock is simply too cheap to ignore. Its management is taking all the right steps to mitigate its competitive risks and boost its growth over the next few years. As the company’s  growth rebounds, CVS stock will likely rally tremendously from today’s depressed base.

All in all, the  outlook of CVS should markedly improve over the next several years, and that, together  wit the hugely discounted valuation of CVS Health stock, should spark a big rally by CVS.

The Fundamentals Aren’t Great

Let’s start by understanding that there is a reason why CVS stock has dropped more than 40% over the past four years; the company’s fundamentals have not been that great.

CVS isn’t growing rapidly, and hasn’t done so  for awhile. Its revenue growth could take a hit in the foreseeable future if Amazon launches a massive e-pharmacy business. CVS’ margins are low and could drop if legislation pushes drug prices lower across the nation. The company also has nearly $100 billion in debt on its balance sheet, and while interest rates are stubbornly low, any increase in rates could greatly raise the company’s expenses.

In other words, CVS is a low-growth company that could turn into a zero-growth company.Furthermore, it has low margins that could  drop to zero,  and its heavy debt load makes it vulnerable to interest rate increases. Because of all that, CVS Health stock has dropped meaningfully over the past several years.

But the weakness of CVS stock won’t last much longer because its fundamentals should improve over the next few years, and they should start rebounding soon.

The Fundamentals Will Improve

The bull thesis on CVS is simple. Specifically, the bulls think the  company’s fundamentals will improve soon. Once they do get better, CVS Health stock, with its current, low valuation, will fly higher.

CVS’ fundamentals will improve largely because of its acquisition of Aetna and CVS’ new plans to dive into local healthcare markets. These new plans center around the rollout of HealthHUB locations, which are essentially  digital, personalized and convenient doctors’ offices that will be located in CVS’ stores.

Management expects to open 1,500 HealthHUBs by 2021. These offices will enable CVS to benefit from new product and service opportunities for the company, including chronic care and disease management, home hemodialysis, healthcare analytics, and more. All those new product and service opportunities are expected to expand the company’s addressable market, improve  its customer retention and loyalty, enhance the shopping experience it provides, and strengthen its competitive advantage.

The HealthHUB rollout is expected to drive high-quality revenue and profit growth over the next several years. Management is guiding for mid -single-digit profit growth into 2021, and low double-digit profit growth thereafter.

CVS stock price doesn’t reflect any of these positive catalysts. It trades at just eight times analysts’ average forward earnings estimate. That’s basically a decade low. The yield of CVS stock is up to 3.8%. That’s basically a decade high.

Ultimately, the combination of fundamental improvements and a discounted valuation will drive CVS materially higher from today’s depressed levels.

The Bottom Line on CVS

The fundamentals supporting CVS stock aren’t great. But they will get better over the next few years. As they do get better, CVS stock should rally, because at the present moment, the stock is priced for death. CVS won’t die. Instead, it will grow, meaning the potential gains by CVS over the next few years is quite compelling.

As of this writing, Luke Lango was long AMZN.