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Are Investors Undervaluing McKesson (MCK) Right Now?

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Zacks Equity Research
·2 min read
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Here at Zacks, our focus is on the proven Zacks Rank system, which emphasizes earnings estimates and estimate revisions to find great stocks. Nevertheless, we are always paying attention to the latest value, growth, and momentum trends to underscore strong picks.

Considering these trends, value investing is clearly one of the most preferred ways to find strong stocks in any type of market. Value investors use fundamental analysis and traditional valuation metrics to find stocks that they believe are being undervalued by the market at large.

Luckily, Zacks has developed its own Style Scores system in an effort to find stocks with specific traits. Value investors will be interested in the system's "Value" category. Stocks with both "A" grades in the Value category and high Zacks Ranks are among the strongest value stocks on the market right now.

One stock to keep an eye on is McKesson (MCK). MCK is currently holding a Zacks Rank of #2 (Buy) and a Value grade of A. The stock is trading with P/E ratio of 10.04 right now. For comparison, its industry sports an average P/E of 20.09. Over the past 52 weeks, MCK's Forward P/E has been as high as 11.23 and as low as 7.31, with a median of 9.92.

We also note that MCK holds a PEG ratio of 1.39. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. MCK's industry currently sports an average PEG of 2.81. Within the past year, MCK's PEG has been as high as 1.85 and as low as 1.19, with a median of 1.53.

Value investors will likely look at more than just these metrics, but the above data helps show that McKesson is likely undervalued currently. And when considering the strength of its earnings outlook, MCK sticks out at as one of the market's strongest value stocks.


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Zacks Investment Research