We've been asking ourselves recently if the market has placed a fair valuation on Cardinal Health. Let's dive into some of the fundamental values of this Large-Cap Health Care company to determine if there might be an opportunity here for value-minded investors.
Cardinal Health's Valuation Is in Line With Its Sector Averages:
Cardinal Health, Inc. operates as a healthcare services and products company in the United States, Canada, Europe, Asia, and internationally. The company belongs to the Health Care sector, which has an average price to earnings (P/E) ratio of 22.94. In contrast, Cardinal Health has a trailing 12 month P/E ratio of 24.7 based on its earnings per share of $6.39.
Cardinal Health has moved 56.4% over the last year compared to 19.6% for the S&P 500 -- a difference of 36.8%. Cardinal Health has a 52 week high of $168.44 and a 52 week low of $100.07.
EPS Trend Sustained Primarily by Reducing the Number of Shares Outstanding:
| 2019 | 2020 | 2021 | 2022 | 2023 | 2024 | |
|---|---|---|---|---|---|---|
| Revenue (M) | $145,534 | $152,922 | $162,467 | $181,326 | $204,979 | $226,827 |
| Gross Margins | 5% | 4% | 4% | 4% | 3% | 3% |
| Net Margins | 1% | -2% | 0% | -1% | 0% | 0% |
| Net Income (M) | $1,363 | -$3,696 | $611 | -$938 | $330 | $852 |
| Net Interest Expense (M) | $294 | $238 | $180 | $147 | $84 | $51 |
| Depreciation & Amort. (M) | $1,000 | $913 | $783 | $692 | $692 | $710 |
| Diluted Shares (M) | 294 | 295 | 281 | 261 | 246 | 243 |
| Earnings Per Share | $2.59 | $4.04 | $2.08 | -$3.37 | $1.26 | $3.45 |
| EPS Growth | n/a | 55.98% | -48.51% | -262.02% | 137.39% | 173.81% |
| Avg. Price | $41.96 | $46.6 | $50.69 | $53.01 | $100.8 | $157.41 |
| P/E Ratio | 16.14 | 11.53 | 24.25 | -15.73 | 79.37 | 45.23 |
| Free Cash Flow (M) | $2,394 | $1,585 | $2,029 | $2,788 | $2,363 | $3,251 |
| CAPEX (M) | $328 | $375 | $400 | $387 | $481 | $511 |
| EV / EBITDA | 5.75 | -5.22 | 13.47 | 182.08 | 16.77 | 21.32 |
| Total Debt (M) | $6,742 | $6,720 | $5,342 | $4,685 | $3,535 | $7,062 |
| Net Debt / EBITDA | 1.66 | -0.94 | 1.74 | 12.13 | -0.73 | 1.67 |
| Current Ratio | 1.03 | 1.17 | 1.15 | 1.04 | 0.98 | 1.02 |
Cardinal Health has growing revenues and increasing reinvestment in the business, generally positive cash flows, and healthy leverage levels. However, the firm suffers from slimmer gross margins than its peers and EPS growth achieved by reducing the number of outstanding shares. Finally, we note that Cardinal Health has just enough current assets to cover current liabilities, as shown by its current ratio of 1.02.
