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Is McKesson (MCK) a Great Value Stock Right Now?

Zacks Equity Research

While the proven Zacks Rank places an emphasis on earnings estimates and estimate revisions to find strong stocks, we also know that investors tend to develop their own individual strategies. With this in mind, we are always looking at value, growth, and momentum trends to discover great companies.

Of these, perhaps no stock market trend is more popular than value investing, which is a strategy that has proven to be successful in all sorts of market environments. Value investors rely on traditional forms of analysis on key valuation metrics to find stocks that they believe are undervalued, leaving room for profits.

On top of the Zacks Rank, investors can also look at our innovative Style Scores system to find stocks with specific traits. For example, value investors will want to focus on the "Value" category. Stocks with high Zacks Ranks and "A" grades for Value will be some of the highest-quality value stocks on the market today.

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 holds a P/E ratio of 9.86, while its industry has an average P/E of 19.45. Over the past year, MCK's Forward P/E has been as high as 10.18 and as low as 7.94, with a median of 9.26.

MCK is also sporting a PEG ratio of 1.41. 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 PEG compares to its industry's average PEG of 2.02. MCK's PEG has been as high as 1.48 and as low as 1.13, with a median of 1.33, all within the past year.

Another notable valuation metric for MCK is its P/B ratio of 4.06. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. This stock's P/B looks solid versus its industry's average P/B of 4.43. Within the past 52 weeks, MCK's P/B has been as high as 4.13 and as low as 2.29, with a median of 3.18.

Finally, investors will want to recognize that MCK has a P/CF ratio of 15.46. This metric takes into account a company's operating cash flow and can be used to find stocks that are undervalued based on their solid cash outlook. This company's current P/CF looks solid when compared to its industry's average P/CF of 37.65. Over the past year, MCK's P/CF has been as high as 15.73 and as low as 7.02, with a median of 8.72.

These are just a handful of the figures considered in McKesson's great Value grade. Still, they help show that the stock is likely being undervalued at the moment. Add this to the strength of its earnings outlook, and we can clearly see that MCK is an impressive value stock right now.


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