Should Value Investors Buy McKesson (MCK) Stock?
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 use fundamental analysis and traditional valuation metrics to find stocks that they believe are being undervalued by the market at large.
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 sporting a Zacks Rank of #2 (Buy), as well as a Value grade of A. The stock is trading with P/E ratio of 9.53 right now. For comparison, its industry sports an average P/E of 19.33. Over the past 52 weeks, MCK's Forward P/E has been as high as 10.22 and as low as 7.94, with a median of 9.31.
MCK is also sporting a PEG ratio of 1.35. 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. Over the last 12 months, MCK's PEG has been as high as 1.48 and as low as 1.13, with a median of 1.33.
Another valuation metric that we should highlight is MCK's P/B ratio of 3.96. The P/B is a method of comparing a stock's market value to 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. Over the past 12 months, MCK's P/B has been as high as 4.21 and as low as 2.29, with a median of 3.21.
Finally, investors should note that MCK has a P/CF ratio of 15.11. This data point considers a firm's operating cash flow and is frequently used to find companies that are undervalued when considering their solid cash outlook. This stock's P/CF looks attractive against its industry's average P/CF of 37.65. Over the past 52 weeks, MCK's P/CF has been as high as 16.05 and as low as 7.02, with a median of 8.81.
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.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
McKesson Corporation (MCK) : Free Stock Analysis Report
To read this article on Zacks.com click here.
