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Should Value Investors Buy Cardinal Health (CAH) Stock?

Zacks Equity Research

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, value investing is easily one of the most popular ways to find great stocks in any market environment. 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 company to watch right now is Cardinal Health (CAH). CAH is currently sporting a Zacks Rank of #2 (Buy), as well as an A grade for Value. The stock has a Forward P/E ratio of 10.53. This compares to its industry's average Forward P/E of 17.36. Over the last 12 months, CAH's Forward P/E has been as high as 10.96 and as low as 8.12, with a median of 9.20.

We also note that CAH holds a PEG ratio of 1.71. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. CAH's industry currently sports an average PEG of 1.79. Over the past 52 weeks, CAH's PEG has been as high as 1.78 and as low as 1.31, with a median of 1.49.

These figures are just a handful of the metrics value investors tend to look at, but they help show that Cardinal Health is likely being undervalued right now. Considering this, as well as the strength of its earnings outlook, CAH feels like a great value stock at the moment.


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