With a daily gain of 1.79% and a 3-month gain of 2.2%, Cencora Inc (COR, Financial) is showing promising performance. The company's Earnings Per Share (EPS) stands at 8.21, indicating a healthy financial status. But the question remains: is the stock fairly valued? This article aims to provide an in-depth analysis of Cencora's financial health, growth prospects, and valuation to answer this question. Let's delve into the details.
Company Introduction
Cencora Inc is one of the top three domestic pharmaceutical wholesalers in the U.S, holding over 90% of the market share along with McKesson and Cardinal Health. The company sources and distributes branded, generic, and specialty pharmaceutical products to pharmacies, hospital networks, and healthcare providers. In addition to this, it also provides commercialization services for manufacturers of pharmaceuticals and medical devices. Cencora's robust business model and its recent expansion into Europe through the acquisition of Alliance Healthcare have positioned it as a leader in the pharmaceutical wholesale industry.
GF Value Analysis
The GF Value is a proprietary measure that estimates the intrinsic value of a stock. It is calculated based on historical multiples, an internal adjustment factor from GuruFocus based on the company's past performance and growth, and future estimates of the business performance. If the stock price is significantly above the GF Value Line, it is considered overvalued, and if it is significantly below, it is deemed undervalued.
Based on this method, Cencora (COR, Financial) is currently fairly valued. With a stock price of $177.8 per share and a market cap of $35.70 billion, the future return of Cencora's stock is likely to be close to the rate of its business growth.
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Financial Strength
Understanding a company's financial strength is crucial before investing. Factors such as the cash-to-debt ratio and interest coverage can provide insights into the financial health of a company. Cencora has a cash-to-debt ratio of 0.28, which is lower than 66.67% of 87 companies in the Medical Distribution industry. The overall financial strength of Cencora is rated 6 out of 10, indicating fair financial health.
Profitability and Growth
Investing in profitable companies typically carries less risk. Cencora has been profitable for 8 out of the past 10 years, with revenues of $254.40 billion and an operating margin of 1.04% in the past 12 months. However, its operating margin is lower than 73.86% of 88 companies in the Medical Distribution industry. Despite this, Cencora's profitability is ranked as fair.
When it comes to growth, Cencora boasts an average annual revenue growth of 10%, ranking better than 61.73% of 81 companies in the Medical Distribution industry. Its 3-year average EBITDA growth is 24.5%, which is higher than 79.41% of 68 companies in the same industry.
ROIC vs WACC
Comparing a company's return on invested capital (ROIC) to its weighted average cost of capital (WACC) can also provide valuable insights. Cencora's ROIC is 11.19, which exceeds its WACC of 7.99, indicating that the company is creating value for its shareholders.
Conclusion
In conclusion, Cencora (COR, Financial) is fairly valued. With fair financial health, consistent profitability, and above-average growth, the company presents a balanced investment opportunity. For more insights into Cencora's financials, check out its 30-Year Financials here.
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