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Is McKesson (MCK) Stock Undervalued Right Now?

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·3 min read
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The proven Zacks Rank system focuses on earnings estimates and estimate revisions to find winning stocks. Nevertheless, we know that our readers all have their own perspectives, so we are always looking at the latest trends in value, growth, and momentum to find strong picks.

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 use tried-and-true metrics and fundamental analysis to find companies that they believe are undervalued at their current share price levels.

In addition to the Zacks Rank, investors looking for stocks with specific traits can utilize our Style Scores system. Of course, value investors will be most interested in the system's "Value" category. Stocks with "A" grades for Value and high Zacks Ranks are among the best value stocks available at any given moment.

One company to watch right now is McKesson (MCK). MCK is currently sporting a Zacks Rank of #2 (Buy), as well as an A grade for Value. The stock is trading with a P/E ratio of 9.66, which compares to its industry's average of 19.12. Over the last 12 months, MCK's Forward P/E has been as high as 10.87 and as low as 7.94, with a median of 9.36.

Investors will also notice that MCK has a PEG ratio of 1.37. 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 1.98. Within the past year, MCK's PEG has been as high as 1.54 and as low as 1.13, with a median of 1.34.

We should also highlight that MCK has a P/B ratio of 4.22. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. This company's current P/B looks solid when compared to its industry's average P/B of 4.43. Within the past 52 weeks, MCK's P/B has been as high as 4.74 and as low as 2.29, with a median of 3.30.

Finally, investors should note that MCK has a P/CF ratio of 17.91. This figure highlights a company's operating cash flow and can be used to find firms that are undervalued when considering their impressive cash outlook. MCK's P/CF compares to its industry's average P/CF of 37.65. Over the past year, MCK's P/CF has been as high as 20.11 and as low as 7.02, with a median of 9.02.

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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