McKesson Corporation (NYSE: MCK) and CVS Health Corporation (NYSE:CVS) are both large-cap medical companies, but which is the superior stock? We will compare the two companies based on the strength of their earnings, profitability, analyst recommendations, valuation, risk, dividends and institutional ownership.
McKesson Corporation pays an annual dividend of $1.12 per share and has a dividend yield of 0.8%. CVS Health Corporation pays an annual dividend of $2.00 per share and has a dividend yield of 2.6%. McKesson Corporation pays out 5.0% of its earnings in the form of a dividend. CVS Health Corporation pays out 39.9% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. McKesson Corporation has increased its dividend for 9 consecutive years and CVS Health Corporation has increased its dividend for 4 consecutive years.
Valuation and Earnings
This table compares McKesson Corporation and CVS Health Corporation’s revenue, earnings per share (EPS) and valuation.
|Gross Revenue||Price/Sales Ratio||EBITDA||Earnings Per Share||Price/Earnings Ratio|
|McKesson Corporation||$199.85 billion||0.15||$3.94 billion||$22.42||6.51|
|CVS Health Corporation||$180.79 billion||0.44||$12.65 billion||$5.01||15.50|
CVS Health Corporation has higher revenue, but lower earnings than McKesson Corporation. McKesson Corporation is trading at a lower price-to-earnings ratio than CVS Health Corporation, indicating that it is currently the more affordable of the two stocks.
Risk & Volatility
McKesson Corporation has a beta of 1.13, suggesting that its share price is 13% more volatile than the S&P 500. Comparatively, CVS Health Corporation has a beta of 0.91, suggesting that its share price is 9% less volatile than the S&P 500.
This table compares McKesson Corporation and CVS Health Corporation’s net margins, return on equity and return on assets.
|Net Margins||Return on Equity||Return on Assets|
|CVS Health Corporation||2.93%||17.47%||6.58%|
Insider and Institutional Ownership
86.6% of McKesson Corporation shares are owned by institutional investors. Comparatively, 82.3% of CVS Health Corporation shares are owned by institutional investors. 1.2% of McKesson Corporation shares are owned by insiders. Comparatively, 0.6% of CVS Health Corporation shares are owned by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company will outperform the market over the long term.
This is a summary of current recommendations for McKesson Corporation and CVS Health Corporation, as provided by MarketBeat.com.
|Sell Ratings||Hold Ratings||Buy Ratings||Strong Buy Ratings||Rating Score|
|CVS Health Corporation||0||7||12||0||2.63|
McKesson Corporation presently has a consensus target price of $169.50, suggesting a potential upside of 16.10%. CVS Health Corporation has a consensus target price of $91.57, suggesting a potential upside of 17.91%. Given CVS Health Corporation’s stronger consensus rating and higher probable upside, analysts clearly believe CVS Health Corporation is more favorable than McKesson Corporation.
CVS Health Corporation beats McKesson Corporation on 9 of the 17 factors compared between the two stocks.
McKesson Corporation Company Profile
McKesson Corporation (McKesson) is engaged in delivering pharmaceuticals, medical supplies and healthcare information technology. The Company operates through two segments: McKesson Distribution Solutions and Technology Solutions. The McKesson Distribution Solutions segment distributes drugs and equipment, and health and beauty care products across North America and internationally. The Distribution Solutions segment provides pharmaceutical solutions for biotech and pharmaceutical manufacturers, and practice management, technology, clinical support and business solutions to oncology and other specialty practices operating in the community setting. The Technology Solutions segment delivers clinical, patient care, financial, supply chain and strategic management software solutions, as well as connectivity, outsourcing and other services. Its McKesson Health Solutions portfolio includes ClarityQx, which is a payment technology.
CVS Health Corporation Company Profile
CVS Health Corporation, together with its subsidiaries, is an integrated pharmacy healthcare company. The Company provides pharmacy care for the senior community through Omnicare, Inc. (Omnicare) and Omnicare’s long-term care (LTC) operations, which include distribution of pharmaceuticals, related pharmacy consulting and other ancillary services to chronic care facilities and other care settings. It operates through three segments: Pharmacy Services, Retail/LTC and Corporate. The Pharmacy Services Segment provides a range of pharmacy benefit management (PBM) solutions to its clients. As of December 31, 2016, the Retail/LTC Segment included 9,709 retail locations (of which 7,980 were its stores that operated a pharmacy and 1,674 were its pharmacies located within Target Corporation (Target) stores), its online retail pharmacy Websites, CVS.com, Navarro.com and Onofre.com.br, 38 onsite pharmacy stores, its long-term care pharmacy operations and its retail healthcare clinics.
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