Last year, shares of healthcare company CVS Health (CVS 1.92%) crashed by more than 43%. The company struggled with rising medical costs and routinely missed earnings expectations. It also got a new CEO. Investors had many reasons to remain doubtful about its future.

But recently, the company posted strong earnings numbers that actually came in better than expected. Under new leadership, CVS appears to be doing better already. Is this just a short-term surprise for investors, or could it truly be a sign that the business is in better shape? And could it lead to more of a rally in the weeks and months ahead?

CVS stock has risen by 40% already this year

Through the first two months of 2025, investors have been much more bullish on the healthcare stock than they were last year. Entering trading on Tuesday, CVS Health was up 40%, significantly better than the S&P 500's (SNPINDEX: ^GSPC) gain of just 2% over that stretch. A big catalyst was the company's latest earnings report, which came out on Feb. 12; the stock jumped 15% that day due to the results.

It was a solid start under new CEO David Joyner, who took over in October, in an effort to turn things around. Not only did revenue of $97.7 billion beat expectations of $97.2 billion, but quarterly adjusted earnings per share of $1.19 also blasted past expectations of $0.93. Given all the bad news and negative press for CVS (there's even been discussion about a possible breakup of the company), it was a much-needed positive event for the stock, giving it some life.

But are investors getting ahead of themselves?

Why CVS may not have smooth sailing

Beating expectations is great news, but that doesn't mean CVS is out of trouble. The company's medical benefits ratio (MBR) came in at 94.8% compared to 88.5% in the prior-year period. The MBR tells investors how much of the premiums the healthcare provider collects it spends on medical care; the higher the ratio, the worse its margins are. The company says increased utilization and a decline in its star ratings for Medicare Advantage were the key reasons for the worsening ratio.

Another concern is that all three of the company's main operating units -- healthcare benefits, health services, and pharmacy and consumer wellness -- reported adjusting operating income numbers for the quarter that were worse than they were a year ago.

While CVS did technically beat expectations, analysts may simply not have been expecting too much from the business, given all the uncertainty. Amid all the question marks and poor track record in recent quarters, it may simply be difficult to forecast how CVS will actually do.

Should investors hold off on buying CVS Health stock?

CVS Health stock has been a hot buy to start 2025, but it's far too early to say that the company has turned things around, or that it's a much safer buy than it was last year. Its MBR is extremely high, and the business still doesn't look in terribly great shape. While it may seem like a cheap buy, trading at around 11 times its expected future earnings, that's based on analyst expectations.

There's still some risk with the stock, and it can be a volatile investment. While an earnings beat jump-started its share price recently, the reverse can easily happen if it falls short of expectations next quarter. If you're willing to be patient and hang on for multiple years, this can still be a good stock to hang on to. But you should brace for a bumpy ride as CVS hasn't turned things around just yet, and doing so may take awhile.

The safer option may be to wait for a couple of quarters to see if the MBR comes down. If it does, that could provide some confirmation that the business is moving in the right direction.