Over the past six months, Cardinal Health’s stock price fell to $186.14. Shareholders have lost 9.4% of their capital, which is disappointing considering the S&P 500 has climbed by 7.7%. This might have investors contemplating their next move.
Following the drawdown, is now an opportune time to buy CAH? Find out in our full research report, it’s free.
Why Does Cardinal Health Spark Debate?
Operating as a critical link in the healthcare supply chain since 1979, Cardinal Health (NYSE: CAH) distributes pharmaceuticals and manufactures medical products for hospitals, pharmacies, and healthcare providers across the global healthcare supply chain.
Two Things to Like:
1. Economies of Scale Give It Negotiating Leverage with Suppliers
Larger companies benefit from economies of scale, where fixed costs like infrastructure, technology, and administration are spread over a higher volume of goods or services, reducing the cost per unit. Scale can also lead to bargaining power with suppliers, greater brand recognition, and more investment firepower. A virtuous cycle can ensue if a scaled company plays its cards right.
With $250.7 billion in revenue over the past 12 months, Cardinal Health is one of the most scaled enterprises in healthcare. This is particularly important because healthcare distribution & related services companies are volume-driven businesses due to their low margins.
2. Outstanding Long-Term EPS Growth
Analyzing the long-term change in earnings per share (EPS) shows whether a company's incremental sales were profitable – for example, revenue could be inflated through excessive spending on advertising and promotions.
Cardinal Health’s EPS grew at 12.4% compounded annual growth rate over the last five years, higher than its 9.9% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.
One Reason to be Careful:
Mediocre Free Cash Flow Margin Limits Reinvestment Potential
If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.
Cardinal Health has shown mediocre cash profitability relative to peers over the last five years, giving the company fewer opportunities to return capital to shareholders. Its free cash flow margin averaged 1.3%, below what we’d expect for a healthcare business.
Final Judgment
Cardinal Health’s merits more than compensate for its flaws. With the recent decline, the stock trades at 16.6× forward P/E (or $186.14 per share). Is now the right time to buy? See for yourself in our comprehensive research report, it’s free.
Stocks We Like Even More Than Cardinal Health
WHILE YOU’RE HERE: Top 9 Market-Beating Stocks. The best stocks don't just beat the market once. They do it again. And again. Robust revenue growth, rising free cash flow, returns on capital that leave their competition in the dust. The market has already rewarded these businesses.
But our AI platform says the party isn't over. Find out which 9 stocks made the cut this week - FREE. Get Our Top 9 Market-Beating Stocks for Free HERE.
Stocks that have made our list include now familiar names such as Nvidia (+1,326% between June 2020 and June 2025) as well as under-the-radar businesses like the once-micro-cap company Tecnoglass (+1,754% five-year return). Find your next big winner with StockStory today.
