In spite of the recent market volatility, investors should not overlook Cardinal Health as an excellent investment opportunity (NYSE:CAH). You should keep an eye on stocks that have broken out of a three-year consolidation pattern. Ideally, the stock in question is a high-quality company with a low valuation. Cardinal Health is a perfect example of this, as it now has a lot to offer investors.
It’s a safe bet that this health care company, one of the top three pharmaceutical distributors in the United States, will continue to grow at a rapid pace. In the long run, you can count on it to be the cornerstone of your portfolio. Look at the company’s business below for some compelling evidence that it is a good investment right now.
In the pharmaceutical distribution industry, there are three main companies that hold 90% of the market share in the United States. McKesson, AmerisourceBergen, and Cardinal Health are the three firms in question. As a result of the industry’s highly regulated environment, it’s one of the best reasons to consider buying shares in Cardinal Health. To put it another way, Cardinal Health should be able to reap the rewards that come with its dominant market position for many more years to come.
With Cardinal Health, pharmaceutical and medical supply producers are linked to a wide range of consumers, including pharmacies, hospitals, doctor’s offices, clinical labs, and outpatient surgery centers. Among Cardinal’s most important clients are CVS and OptumRx, both of whom have contracts in place through 2023 and 2024, respectively. To be sure, Cardinal Health has a leg up on its “big three” competitors since it has a stronger foothold in medical supply production and distribution than any of the other “big three” corporations.
We know that the healthcare industry will continue to develop over time, and the global epidemic has only highlighted the importance of enterprises involved in keeping the world healthy. A firm like Cardinal Health, which is expected to have high profitability in 2021 and beyond, may rest easy knowing that the economic outlook is bright. Taking into account that the world’s population is growing older and older, there will be an increasing need for health care products and services in the years to come In addition, the elective procedure market is expected to rise up again as individuals become more comfortable with the idea of returning to the doctor for non-essential care, which bodes well for Cardinal.
This company may also be bolstered by Vice President Joe Biden’s health care stance and his proposals to build on the Affordable Care Act. Cardinal Health’s role as Federal Pharmacy Partnership Strategy for COVID-19 network administrator will allow the company to play an important part in one of the largest mass immunization initiatives ever. It’s reasonable to say that this corporation has many of options for rewarding shareholders who have been with them from the beginning.
If you’re still not convinced, remember that Cardinal Health is a dividend aristocrat and could be a good source of long-term income. At this point in time, the stock’s dividend yield is 3.11 percent, and it has increased dividends for 32 straight years. When you consider that the stock price has benefited from share buyback programs and that the company has a history of dividend growth, it’s clear that this is a well-run business that values rewarding its shareholders.
There’s a good probability that investors are undervaluing this outstanding company because of the company’s concerns relating to its role in the opioid crisis, despite the lower share price. You can clearly see that Cardinal Health’s P/E ratio of 13x compares favorably to the 42x P/E ratio of the S&P 500. Overall, Cardinal Health is a good buy given its recent breakthrough and stands out in a market full of overvalued corporations.
Is Cardinal Health a dividend aristocrat?
CAH has repurchased 11% of its shares over the last five years, resulting in profits growth of the same amount just from share repurchases, as can be seen in the chart below. CAH, on the other hand, has maintained its status as a dividend aristocrat for the past 34 years.
How much debt does Cardinal Health have?
Cardinal Health’s debt at the end of June 2021 was $6.17 billion, down from $6.76 billion a year earlier, according to the image below. As a result, the company’s net debt is US$2.77 billion.
How Healthy Is Cardinal Health’s Balance Sheet?
Cardinal Health has obligations of US$27.6 billion due within the next 12 months, and liabilities of US$15.0 billion that were due in the future. In contrast, the company held US$3.41 billion in cash and US$9.11 billion in receivables that were due within a year. Consequently, its liabilities total US$30.1 billion, which is greater than the sum of its cash and short-term receivables put together.
The US$14.9 billion firm is like a titan that towers over the rest of us. As a result, we believe shareholders should keep a careful eye on this development. If Cardinal Health’s creditors were to demand repayment, the company would most likely need a massive re-capitalization.
Debt-to-Earnings Ratio (D/E) and Debt-to-Earnings Ratio (D/E) are two There are two ways to measure a company’s debt-to-EBITDA ratio: the first is net debt divided by EBITDA, and the second is how many times its EBIT covers interest expense (or its interest cover, for short). You can take into account both the total amount of debt (with net debt to EBITDA) and the actual interest costs connected with that debt (with its interest cover ratio).
Just 1.1 times EBITDA, Cardinal Health’s net debt indicates that it’s not a reckless borrower.
With EBIT coming in at a healthy 10.0 times interest expense over the past year, this position is supported.
Cardinal Health’s EBIT appears to have stagnated, but at least the company’s earnings are stable for the time being.
We can’t deny that the balance sheet is where we learn the most about debt.
Cardinal Health’s potential to strengthen its balance sheet over time will ultimately be determined by the company’s future profitability.
When it comes to seeing what the experts are saying, this free study on analyst profit estimates is a good place to begin your research.
Free cash flow is needed to pay off debt, and accounting gains are not enough. Checking how much of the EBIT is underpinned by free cash flow is therefore worthwhile. Cardinal Health actually generated more free cash flow than EBIT during the past three years. We’re as happy as a puppy in a bumblebee outfit when we see such strong cash generation.
Our View
In our opinion, Cardinal Health’s total liabilities and EBIT growth rate have a negative impact on the company. A different picture emerges, though, when you convert EBIT to free cash flow. This implies some resiliency. The healthcare industry, which Cardinal Health is a part of, is regarded to be a highly defensive sector. Due to its debt, it appears to us that Cardinal Health is a risky investment from all the perspectives we’ve just discussed. Although this isn’t necessarily a bad thing, it’s something to be mindful of. We can’t deny that the balance sheet is where we learn the most about debt. In the end, though, every organization has the ability to manage risks that are not shown in the financial statements. Before investing in Cardinal Health in particular, we’ve uncovered three warning indicators to watch out for.
There are instances when focusing on companies that don’t even require debt is more convenient. It is currently possible for readers to view a list of growth stocks with zero net debt for free.
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Is Cardinal Health undervalued?
Any way we look at it, Cardinal Health is being undervalued right now. The intrinsic value is $64.57 even if we assume only 3% growth in free cash flow for the last four quarters. Cardinal Health is still selling 20% below its real value.
Is Cardinal Health a dividend king?
As a result, Cardinal Health has been designated as a Dividend Aristocrat and Champion for its 25-year streak of dividend increases.
Is Cardinal Health a good place to work?
Cardinal Health employees on CareerBliss give their company an average rating of 3.7 out of 5.0, which is 5% lower than the average rating for all companies on CareerBliss. A 4.9 rating from Senior Sales Consultants and a 4.7 rating from Production Supervisors are the most satisfied Cardinal Health personnel.
Who purchased Cardinal Health?
Medical supplies and medications distributor Cardinal Health announced Friday that Hellman & Friedman has agreed to buy its Cordis business for around $1 billion from the company’s private equity arm.
How much does the CEO of Cardinal Health make?
Michael C. Kaufmann, the CEO of CARDINAL HEALTH INC, earned $14,217,127 in total remuneration for his role. All of this money came from a salary of $1,286,612; a total bonus of $2,500; a stock option grant of $0; a stock award of $10.239; and other forms of remuneration of $143,033.
Does CVS own Cardinal Health?
Both McKesson and Cardinal Health supply CVS Health with their mail and specialty pharmacies, respectively. Cardinal recently announced that it had extended its distribution arrangement with CVS through June 2027. Our top 15 U.S. pharmacies for 2020 are shown below.)
Customer Segments
In the pharmaceutical industry, Cardinal Health delivers a wide range of pharmaceutical and medical products and services. Customers of the company can be categorized into two main groups:
- A wide range of grocery shops, retail pharmacy chains, medical and pharmaceutical wholesalers, pharmacy service providers (and other commercial retail enterprises), and other customers
- Healthcare facilities, such as hospitals and clinics, medical research and laboratory firms, ambulatory surgical centers, and other healthcare providers. Medical and Healthcare Customers
More than 40% of Cardinal Health’s revenue in 2016 came from just five of its major customers, including the company’s largest client, CVS Health.
Cardinal Health primarily services consumers in the United States, which accounts for the bulk of the Company’s revenue. Customers in China and Canada are among those served by the company’s international division.
Value Propositions
- One of the largest and most prominent distributors of medical and pharmaceutical products with a major portion of the market and a number of high-profile clients, the Company has a strong industry reputation.
- Branded and generic pharmaceuticals; speciality pharmaceuticals; over-the-counter medical and consumer goods; as well as pharmacy management services;
- In addition to providing a huge customer base in the United States, the company also serves customers in China and Canada.
- Having lengthy partnerships with manufacturers and suppliers of medical and pharmaceutical items, the Company is able to supply a comprehensive range of products to its customers; and
- Expertise and experience in the sector. The company employs specialists across its operating segments and has a team of seasoned industry leaders on its board.
Channels
Through its network of offices, Cardinal Health employs an in-house sales force to sell directly to customers. Company’s sales and service team is based on regional regions (the US, Canada, and China are all represented).
Cardinal Health also runs service, pharmacy and distribution facilities around the world to ensure that it can serve customers swiftly and efficiently through adjacent sites. Cardinal Health. The company has more than 300 locations around the world.
Customer Relationships
On a self-service basis, Cardinal Health does not offer its products. An online client portal is available for those customers who do not want or need to deal with sales or service representatives of the company directly to manage their transaction history or account information.
With the help of direct customer consultation, Cardinal Health develops personalized sales and distribution contracts that meet the specific needs of each client. The Company aims to build long-term connections with its customers in order to secure repeat business.
Customers of Cardinal Health can always count on them for assistance. Big customers get their own dedicated account management teams, who are always available to answer questions or concerns. Other clients can reach out to the company’s support staff via phone and email to get personalized assistance from the company.
Online resources provided by Cardinal Health include product information and contract terms and conditions. As a result, it maintains a presence on social media platforms such as Facebook (Facebook), Twitter (Twitter), YouTube (Youtube), and LinkedIn.
Key Activities
Cardinal Health is a provider of healthcare services and a distributor of pharmaceuticals. As a result of this, the company’s operations are divided into two distinct reportable business segments: Pharmaceutical, which deals with the distribution of pharmaceuticals, both branded and generic, specialty pharmaceuticals, over the counter medicines, and consumer goods; Nuclear Pharmacy and Cyclotron Facility Operations and Pharmacy Management Services
This division’s Cardinal Health brand medical and surgical items are also produced under license by the Medical division under license from the Cardinal Health brand. Cardinal Health services customers in retail, distribution, and healthcare facilities in the United States, Canada, and China.
Key Partners
There are a number of companies and organizations working with Cardinal Health to ensure that its products are efficiently delivered and sold. The following are some broad categories into which these collaborators can be sorted:
- Partners in the supply chain, including pharmaceutical manufacturers and other medical product providers, as well as suppliers of services, technology, equipment, and materials that are used across the organization;
- a global network of distribution and logistics firms, including specialized pharmaceutical distributors, that work with the company to get its products to clients all over the world;
- GPO Partners, a set of purchasing organizations with whom the company collaborates to run group purchasing programs; and GPO Partners
- Strategic & Alliance Partners, a group of premier pharmaceutical businesses, with whom the Company collaborates on collaborative marketing, branding, and development projects.
In the last few years, Cardinal Health has formed a number of strategic alliances. For example, Pfizer, Innovatix, Vizient, Intalere, and Asembia are among the group purchasing organizations involved.
Key Resources
Products and intellectual property, supplier relationships and supply chain infrastructure, research and development facilities, sales and distribution facilities, partnerships, and staff are Cardinal Health’s most important resources.
A variety of patents and intellectual properties owned by Cardinal Health are put to use in the company’s product development and distribution. US Patent and Trademark Office records reveal a number of patent applications in which Cardinal Health is named as an applicant or assignee, including applications titled “Modular cassette synthesis unit,” “Bone plate,” and “Apparatus and methods for sealing blood vessel punctures,” among other titles.
Additionally, Cardinal Health owns and/or rents a variety of physical facilities that are critical to the company’s operations. A national logistics center, six speciality distribution facilities, 140 nuclear pharmacy and cyclotron facilities, and 70 medical-surgical distribution, assembly, and other operating facilities are included in this total of 24 key pharmaceutical distribution facilities.
Cost Structure
Purchasing products and merchandise, conducting research and development, running a supply chain and distribution infrastructure, managing its partnerships and supplier relationships, implementing marketing campaigns, and retaining employees are all costs Cardinal Health incurs in relation to these activities.
Expenditures for distribution, selling, general, and administrative costs – including occupancy and employee benefit costs – amounted to $3.65 billion for Cardinal Health in 2015.
Revenue Streams
Pharmaceutical and medical products, as well as related services, are the primary sources of Cardinal Health’s revenue. Sales and distribution contracts, as well as other service-related fees, are the primary sources of revenue for the company.
Cardinal Health’s 2016 revenue totaled $121.55 billion, a significant increase over the $102.53 billion it made in 2015. Increased revenue was attributed to increased sales from existing and new pharmaceutical distribution customers and from acquisitions. The Company’s Pharmaceutical business generated $109.13 billion in revenue for the year.
What is cash dividend?
As part of the company’s current and cumulative profits, a cash dividend is a payout of monies to stockholders. In contrast to stock dividends or other forms of value, cash dividends are distributed immediately in cash.
It is up to the board of directors to decide whether or not dividend payments will be maintained or altered. Reinvesting dividends is an option for long-term investors who want to maximize their returns. Reinvesting or taking cash dividends is an option offered by most brokers.
