NEW YORK (
) has been reiterated by TheStreet Ratings as a buy with a ratings score of A. The company's strengths can be seen in multiple areas, such as its impressive record of earnings per share growth, compelling growth in net income, revenue growth, notable return on equity and solid stock price performance. We feel these strengths outweigh the fact that the company shows low profit margins.
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Highlights from the ratings report include:
- MCKESSON CORP has improved earnings per share by 29.0% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, MCKESSON CORP increased its bottom line by earning $5.60 versus $4.29 in the prior year. This year, the market expects an improvement in earnings ($7.24 versus $5.60).
- The company, on the basis of net income growth from the same quarter one year ago, has significantly outperformed against the S&P 500 and exceeded that of the Health Care Providers & Services industry average. The net income increased by 23.4% when compared to the same quarter one year prior, going from $422.00 million to $521.00 million.
- Despite its growing revenue, the company underperformed as compared with the industry average of 12.9%. Since the same quarter one year prior, revenues slightly increased by 9.9%. Growth in the company's revenue appears to have helped boost the earnings per share.
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Health Care Providers & Services industry and the overall market, MCKESSON CORP's return on equity exceeds that of both the industry average and the S&P 500.
- Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period. Although other factors naturally played a role, the company's strong earnings growth was key. The stock's price rise over the last year has driven it to a level which is somewhat expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
McKesson Corporation delivers medicines, pharmaceutical supplies, information, and care management products and services for the healthcare industry. The company has a P/E ratio of 16.3, equal to the average wholesale industry P/E ratioand below the S&P 500 P/E ratio of 17.7. McKesson has a market cap of $21.5 billion and is part of the
industry. Shares are up 17.9% year to date as of the close of trading on Tuesday.
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--Written by a member of TheStreet Ratings Staff.
TheStreet ratings do not represent the views of TheStreet's staff or its contributors. Ratings are established by computer based on metrics for performance (which includes growth, stock performance, efficiency and valuation) and risk (volatility and solvency). Companies with poor cash flow or high debt levels tend to earn lower ratings in our model.