With a recent daily loss of 2.26% and a modest 3-month gain of 3.86%, investors are closely monitoring Cencora Inc (COR, Financial). The company's Earnings Per Share (EPS) stand at 8.53, which is a critical factor in assessing its profitability. However, a pressing question remains: Is Cencora modestly overvalued? This article delves into the valuation analysis of Cencora, providing readers with a detailed exploration of its financial standing and market position.
Company Introduction
Cencora Inc (COR, Financial) is a dominant force in the pharmaceutical wholesale industry, holding a significant market share alongside McKesson and Cardinal Health. The company's expansive operations include the sourcing and distribution of various pharmaceutical products, as well as providing commercialization services for manufacturers. With a recent expansion into Europe through the acquisition of Alliance Healthcare, Cencora has solidified its international presence. The current stock price of $194.37 contrasts with the GF Value of $171.53, suggesting a potential overvaluation. This juxtaposition sets the stage for an in-depth analysis of Cencora's intrinsic value.
Summarize GF Value
The GF Value is a proprietary metric that reflects the intrinsic worth of a stock, incorporating historical trading multiples, a GuruFocus adjustment factor, and future business performance estimates. Cencora currently appears modestly overvalued when applying this valuation method. The stock's market cap of $39 billion, coupled with its price point, indicates that the stock may not align with its suggested fair value. This assessment is crucial for investors anticipating the stock's future performance relative to its current market price.
Given Cencora's relative overvaluation, the long-term return of its stock could potentially lag behind its business growth, posing a consideration for investors focused on future performance.
Financial Strength
Investors must scrutinize a company's financial strength to avoid capital loss. Cencora's cash-to-debt ratio of 0.54 places it in a less favorable position than over half of its peers within the Medical Distribution industry. However, its financial strength score of 7 out of 10 indicates a reasonably healthy balance sheet, an essential factor for potential investors.
Profitability and Growth
Consistent profitability is less risky for shareholders, and Cencora has maintained profitability for 8 out of the past 10 years. With annual revenue of $262.20 billion and an Earnings Per Share (EPS) of $8.53, the company's operating margin of 1.02% is not the strongest in its sector. Nevertheless, its profitability rank of 7 suggests a stable financial performance. Growth is paramount for valuation, and Cencora's 3-year average annual revenue growth rate of 11.4% is commendable, although its EBITDA growth rate has not been as impressive.
ROIC vs WACC
Comparing Return on Invested Capital (ROIC) to the Weighted Average Cost of Capital (WACC) provides insight into Cencora's value creation. With an ROIC of 11.13 and a WACC of 8.44 over the past 12 months, Cencora demonstrates its ability to generate returns above its capital costs, indicating a positive value proposition for shareholders.
Conclusion
In summary, Cencora (COR, Financial) appears modestly overvalued based on current market metrics. While the company's financial condition and profitability are fair, its growth ranking is less impressive compared to industry peers. For a more detailed understanding of Cencora's financials, investors can review the 30-Year Financials here.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
