Which Medical Distribution Stock is a Better Buy?

The healthcare sector is always a good place to look for stocks because we know that demand will always be there. In fact, demand is likely to rise given that the population is growing older and the cost of care is outpacing inflation.


While many look to buy pharmaceutical stocks, there is certainly a greater deal of risk. An option with less risk is to look at medical distribution stocks.


McKesson (MCK) and Cardinal Health (CAH) are two of the more intriguing medical distribution stocks. Let’s take a look at these two companies to help investors determine which is the better buy.

MCK, based in San Francisco, provides healthcare services along with information technology solutions. The company’s Distribution Solutions segment sells both generic and branded pharmaceutical drugs in addition to other healthcare products. MCK also rakes in money through the distribution of medical-surgical supplies, logistics, medical equipment, oncology physician access, and more.

MCK has a forward P/E ratio of 10.03. This means the stock might be undervalued at $191.03. MCK’s 52-week high is $204.66. The stock’s 52-week low is $139.77. MCK has a beta of 0.88 so it will likely maintain most of its value even if the market significantly declines.

MCK has a B POWR Rating. The stock has Bs in the Value and Stability components of the POWR Ratings. MCK has Cs in the Momentum and Quality components of the POWR Ratings. Click here to find out how MCK grades out in the Sentiment and Growth components of the POWR Ratings.

MCK is ranked in the top 10 of its Medical – Services industry, landing at number 10 out of 77 stocks in the segment. You can find out more about the publicly traded companies in this space by clicking here.

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The analysts are bullish on MCK. The average analyst price target for the stock is $225.53. The lowest analyst target price for MCK is $205 while the highest target price is $257. If the stock hits the analysts’ average target price, it will have increased by slightly more than 19% in value.


Based in Dublin, Ohio, CAH is a countrywide distributor and provider of services for pharmacies, prescription drug manufacturers, and healthcare providers. CAH’s pharmaceutical segment is the second-largest in the country. The stock has a forward P/E ratio of 9.60. This low figure indicates CAH might be a bit undervalued at $56.68 per share. CAH has a 52-week high of $62.96. The stock’s 52-week low is $44.65. CAH has a beta of 1.06, meaning it probably won’t fluctuate much in the event that the market significantly undulates moving forward.

CAH has a C POWR Rating. This grade indicates the stock is a Hold. CAH has C grades in the Momentum, Quality, Sentiment, and Growth components. The stock has a B grade in the Value component of the POWR Ratings. Click here to find out how CAH fares in the Stability component of the POWR Ratings.

CAH is ranked 30th of 77 stocks in the Medical – Services segment. You can find out more about the stocks in this space by clicking here.

CAH has an average analyst target price of $63.36. If CAH hits this price, it will have popped by slightly more than 10%. The lowest analyst target price for CAH is $56. The highest analyst target price for CAH is $74. The stock’s average price target has increased $1.86 across the prior 32 weeks. CAH’s average upside potential has been 13% in the past 13 months. Of the 16 analysts who have issued CAH recommendations, two consider the stock a Strong Buy, four consider it a Buy, and 10 consider it a Hold.

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Which is the Better Buy?

MCK is the better buy. MCK has a B POWR Rating. CAH has a C POWR Rating. Furthermore, MCK is ranked in the top 10 of its segment. CAH is barely ranked in the top half of its space. Investors should not hesitate to add MCK to their portfolio.

MCK shares were trading at $192.67 per share on Friday morning, up $1.43 (+0.75%). Year-to-date, MCK has gained 11.30%, versus a 16.21% rise in the benchmark S&P 500 index during the same period.

About the Author: Patrick Ryan

Patrick Ryan has more than a dozen years of investing experience with a focus on information technology, consumer and entertainment sectors. In addition to working for StockNews, Patrick has also written for Wealth Authority and Fallon Wealth Management. More…

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