Today, Cencora Inc (COR, Financial) experienced a daily gain of 1.42%, although it has seen a 3-month loss of -7.3%. With an Earnings Per Share (EPS) of 9.14, investors are prompted to question: is the stock modestly overvalued? This article delves into Cencora's valuation to provide a clearer picture of its financial standing and market position.
Company Introduction
Cencora, one of the top three pharmaceutical wholesalers in the United States, plays a critical role in the healthcare supply chain. Alongside industry giants McKesson and Cardinal Health, Cencora dominates over 90% of the US pharmaceutical wholesale market. The company has expanded its operations globally, including a significant acquisition in Europe in 2021. With a current stock price of $219.82 and a market cap of $43.80 billion, a comparison with the GF Value, estimated at $198.3, suggests that the stock might be trading above its fair value.
Understanding GF Value
The GF Value is a proprietary measure calculated to represent the intrinsic value of a stock. It incorporates historical trading multiples, an adjustment factor based on past performance, and estimates of future business performance. According to this measure, Cencora (COR, Financial) appears modestly overvalued. The GF Value suggests that the stock's future return may be lower if the price remains above this intrinsic value benchmark.
Financial Strength and Stability
Investing in companies with robust financial health is crucial to minimize the risk of loss. Cencora's cash-to-debt ratio stands at 0.39, reflecting a position weaker than 65.26% of its peers in the Medical Distribution industry. However, its overall financial strength is rated 7 out of 10 by GuruFocus, indicating a relatively stable financial condition.
Profitability and Growth Prospects
Consistent profitability is a key indicator of a company's investment potential. Cencora has maintained profitability over the past decade, with a recent annual revenue of $276.50 billion and an operating margin of 1.07%. Despite these figures, the company's profitability ranks below 76.04% of its industry counterparts. Growth metrics also present a mixed picture, with a 3-year average revenue growth rate better than 71.59% of industry peers, but a stagnant EBITDA growth rate.
The comparison of Return on Invested Capital (ROIC) and Weighted Average Cost of Capital (WACC) further supports this analysis. Cencora's ROIC of 11.64 exceeds its WACC of 8.64, indicating efficient capital management relative to costs.
Conclusion
While Cencora (COR, Financial) displays signs of being modestly overvalued based on GF Value, its strong market position and sound financial health should not be overlooked. Potential investors should weigh these factors carefully against the company's current market valuation. For a deeper insight into Cencora's financials, consider exploring its 30-Year Financials.
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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.
