McKesson currently trades at $712.18 and has been a dream stock for shareholders. It’s returned 332% since June 2020, blowing past the S&P 500’s 83.5% gain. The company has also beaten the index over the past six months as its stock price is up 18%.
Is now still a good time to buy MCK? Or are investors being too optimistic? Find out in our full research report, it’s free.
Why Are We Positive On McKesson?
With roots dating back to 1833, making it one of America's oldest continuously operating businesses, McKesson (NYSE:MCK) is a healthcare services company that distributes pharmaceuticals, medical supplies, and provides technology solutions to pharmacies, hospitals, and healthcare providers.
1. Long-Term Revenue Growth Shows Momentum
A company’s long-term sales performance can indicate its overall quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Luckily, McKesson’s sales grew at a decent 9.2% compounded annual growth rate over the last five years. Its growth was slightly above the average healthcare company and shows its offerings resonate with customers. 
2. 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 $359.1 billion in revenue over the past 12 months, McKesson 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.
3. Outstanding Long-Term EPS Growth
We track the long-term change in earnings per share (EPS) because it highlights whether a company’s growth is profitable.
McKesson’s EPS grew at an astounding 17.2% compounded annual growth rate over the last five years, higher than its 9.2% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.
Final Judgment
These are just a few reasons why we think McKesson is a high-quality business, and with its shares outperforming the market lately, the stock trades at 19.3× forward P/E (or $712.18 per share). Is now the right time to buy? See for yourself in our full research report, it’s free.
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