The No. 1 Medical Stock to Buy for 2023

NYSE: MCK | McKesson Corp. News, Ratings, and Charts

MCK – Popular healthcare service provider McKesson (MCK) has delivered robust returns despite the market turbulence over the past year. Moreover, MCK’s solid fundamentals should help it to sustain its momentum. Thus, the stock might be an ideal buy for 2023. Keep reading…

Despite the major macroeconomic headwinds in the stock market, shares of healthcare services provider McKesson Corporation (MCK) have gained 52.1% over the past year to close the last trading session at $375.03. Also, Wall Street analysts expect the stock to hit $426.25 in the near term, indicating a potential upside of 13.7%.

While the company missed the consensus EPS estimate by 0.7% in the last quarter, its revenue beat analysts’ estimates. The company has raised its outlook for fiscal 2023 and expects its EPS to come between $24.45 and $24.95 versus the $23.95 to $24.65 expected earlier.

Moreover, MCK’s revenue grew at a CAGR of 7% over the past three years, while the company’s normalized net income grew at a CAGR of 44.1% over the past three years.

For the first six months of the fiscal year, MCK returned $1.6 billion of cash to shareholders, which included $1.5 billion of common stock repurchases and $139 million of dividend payments.

Here’s what could influence MCK’s performance in the upcoming months:

Robust Financials

MCK’s revenues increased 5.4% year-over-year to $70.16 billion for the second quarter that ended September 30, 2022. The company’s operating income increased 108.5% year-over-year to $1.12 billion.

During the same quarter, its net income increased 211.9% year-over-year to $967 million, while EPS increased 275.4% year-over-year to $6.42.

Consistent Dividend Payouts

MCK’s annual dividend of $2.16 yields 0.58% on the current share price. It has a four-year average yield of 0.91%.

Its dividend payouts have increased at an 8.1% CAGR over the past three years and a 10.3% CAGR over the past five years. The company has increased its dividend payouts for 15 consecutive years.

Discounted Valuation

In terms of forward non-GAAP PEG, MCK’s multiple of 1.23x is 40.8% lower than the 2.08x industry average. Its forward P/S of 0.19x is 95.9% lower than the 4.74x industry average. Also, the stock’s forward EV/Sales of 0.21x is 94.9% lower than the 4.15x industry average.

POWR Ratings Show Promise

MCK has an overall rating of A, which equates to a Strong Buy in our POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories. MCK has an A grade for Growth, reflecting its robust financials in the last reported quarter.

It has a B grade for Value, consistent with its discounted valuation. Also, its B grade in Stability is in sync with its relatively low beta of 0.63.

MCK is ranked first among 79 stocks in the Medical – Services industry. Click here to access MCK’s Momentum, Sentiment, and Quality ratings.

Bottom Line

Healthcare companies face an inelastic demand for their products and services, which provides a way for investors to hedge against macroeconomic uncertainties. This helped MCK to deliver significant returns over the past year. Moreover, the company pays a steady dividend.

So, given its robust financials, consistent dividend payouts, and discounted valuation, the stock might be an ideal buy for 2023.

How Does McKesson Corporation (MCK) Stack up Against Its Peers?

MCK has an overall POWR Rating of A, equating to a Strong Buy rating. One can check out these other stocks within the same industry with an A (Strong Buy) rating: HealthStream, Inc. (HSTM), AmerisourceBergen Corporation (ABC), and Quipt Home Medical Corp. (QIPT)

MCK shares were unchanged in premarket trading Tuesday. Year-to-date, MCK has declined -0.02%, versus a 4.76% rise in the benchmark S&P 500 index during the same period.

About the Author: Kritika Sarmah

Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities. More...

More Resources for the Stocks in this Article

TickerPOWR RatingIndustry RankRank in Industry
MCKGet RatingGet RatingGet Rating
HSTMGet RatingGet RatingGet Rating
ABCGet RatingGet RatingGet Rating
QIPTGet RatingGet RatingGet Rating

Most Popular Stories on

2024 Stock Market Outlook

The time to think about the 2024 stock market is now. Will it be a bull or bear? And where does the S&P 500 (SPY) end the year? And what are the top picks to outperform? Investment veteran Steve Reitmeister does his level best to answer all these questions. Just read on below...

3 Financial Stocks to Boost Your Portfolio's Bottomline

The consumer financial sector is experiencing a transformative wave of technological advancements fueled by the rise of fintech companies and digital banking. Amid this swiftly evolving landscape, three consumer finance stocks, Mastercard (MA), Noah Holdings (NOAH), and EZCORP, Inc. (EZPW) could be ideal buys this month. Read more…

POWR Income Stock of the Week: Ternium SA (TX)

The Federal Trade Commission has been on a crusade this year to stop mergers in their tracks with little regard to the size of the merger or the industry it was taking place in. But, with major setbacks being delivered by the courts the mergers and acquisitions markets are thawing, and one industry set to consolidate is the steel industry. This may be a boon for all the steel players involved, and one under the radar income play steel producer is Ternium.

3 Travel Stocks to Watch With Holiday Gains Potentially in the Pipeline

The travel industry is witnessing a surge in cruise market interest, driven by evolving consumer preferences and sustainability considerations. Hence, travel stocks Carnival Corporation (CCL), Royal Caribbean (RCL), and Lindblad Expeditions (LIND) might be sound watchlist additions before the holidays. Read more…

VERY Healthy Stock Rotation Underway

The S&P 500 (SPY) is putting the finishing touches on a strong 2023 campaign. This is the 4th straight year the large cap index has outperformed small and mid caps. Gladly there are signs this is going to change which is a very healthy sign for the longevity of this bull run. 43 year investment pro Steve Reitmeister explains why in his latest commentary that includes insights on this top 11 picks for today’s market. Read on below for more...

Read More Stories

More McKesson Corp. (MCK) News View All

Event/Date Symbol News Detail Start Price End Price Change POWR Rating
Loading, please wait...
View All MCK News