McKesson (MCK:NYS) Fundamental Valuation Report

Fundamental Valuation Report


Healthcare:Medical Distribution

This Report was generated using the valuation tools available on For a free 30 day trial click here.

Close Price/Date
$126.40 (USD) 20/05/2019

Weighted Valuation
$121.74 (USD)

Overall Rating
Fairly valued to slightly Overvalued by 3.7%

Valuation Models Analyst Consensus: $121.00 (USD)
(in order of importance) Comparables: $105.52 (USD)
Adjusted Book Value: $156.43 (USD)
Valuation Methods This company is:
Cash Flow: Undervalued on a Cash Flow Valuation
Comparable Company: Overvalued on a Comparable Valuation
Asset: Undervalued on an Asset Valuation

Company Overview (MCK:NYS USD)

Price 126.40
Range 123.60 – 126.57
52 week 108.23 – 150.00
Open 124.29
Vol / Avg. 2.17M/1.53M
Mkt cap 24.09B
P/E 738.71
Div/yield 1.51/0.01
EPS 0.17
Shares 189.96M
Beta 1.22

Company Description

McKesson Corporation is the largest and most complex of the leading third-party logistics providers. The company is engaged in wholesale pharmaceutical and medical products sourcing, distribution and dispensing, contract manufacturing, and related IT services to acute care hospitals and health systems, independent and chain retail pharmacies in North America, Europe, and Canada. Through acquisition and joint ventures McKesson also runs the fourth largest pharmacy chain and provides technology and consulting services to manufacturers, pharmacies, physician offices, surgery centers, long-term care facilities, and home healthcare businesses.

Valuation Details

 We have up to 6 valuation points for each company. Details are at the bottom of the report.

Discounted Cash Flow and Sensitivity Analysis for MCK:NYS

Using a discounted cash flow model we generated an intrinsic value of $285.85 (USD) for MCK:NYS

Sensitivity Analysis

(showing how changes in the input variables impact the DCF calculation)

MCK:NYS Current Values Valuation If Dropped * Valuation If Raised *
Calculated Value: $285.85 1% 5% 1% 5%
WACC (or Ke) 8.41 $360.66 $234.41
Terminal Growth Rate 3.00 $239.80 $352.81
Tax Rate 0.27 $305.19 $266.51
Cash Flow 4,635,515,000 $270.82 $300.88
Capital Expenditures -419,800,000 $284.55 $287.15
Long Term Debt 8,107,000,000 $287.98 $283.72

* Changes are absolute: ex WACC from 8% to 7%

Comparables Model

Using similar companies and price based ratios we generated a valuation of $105.52 (USD) for MCK:NYS. We also generated a valuation of $126.45 (USD) using other metrics and comparables.
The comparable companies were Henry Schein (HSIC:NAS), Cardinal Health (CAH:NYS) and AmerisourceBergen (ABC:NYS).

Company MCK:NYS End Date Value
Earnings/Share $0.17 (USD)
Book Value/Share $48.35 (USD)
Sales/Share $1,063.60 (USD)
Cash Flow/Share $15.77 (USD)
EBITDA/Share $9.25 (USD)
Price Based on Comps Adjustment Factor (%)
$0.00 (USD) -19.4
$173.77 (USD) 12.7
$335.39 (USD) -69.8
$121.28 (USD) -48.3
$86.83 (USD) -12.5
MCK:NYS Ratios Used Average Values HSIC:NAS CAH:NYS ABC:NYS
0.00 PE Ratio 1634.35 18.37 4871.00 13.67
2.47 PB Ratio 3.59 3.22 2.40 5.15
0.11 PS Ratio 0.32 0.75 0.11 0.09
7.56 PCF Ratio 10.14 14.38 7.34 8.69
22.01 EV to EBITDA 9.38 11.65 7.69 8.81


Using a multiples approach we generated a valuation of  $131.22 (USD) for MCK:NYS

Company MCK:NYS End Date Value
Earnings/Share $0.17 (USD)
Book Value/Share $48.35 (USD)
Sales/Share $1,063.60 (USD)
Cash Flow/Share $15.77 (USD)
EBITDA/Share $9.25 (USD)
Price Based on Comps Adjustment Factor
$3.15 (USD) 0
$183.70 (USD) 0
$199.86 (USD) 0
$161.89 (USD) 0
$107.48 (USD) 0
Ratios Ratio Average
PE Ratio 18.52
PB Ratio 3.80
PS Ratio 0.19
PCF Ratio 10.27
EV to EBITDA 11.61

Adjusted Book Value versus Historical Price to Book

The average the Price to Book ratio for  MCK:NYS for the last 10 years was  3.67

We ran the Adjusted Book Value for  MCK:NYS and generated a book value of  $42.60 (USD)
By multiplying these we get an adjusted valuation of  $156.43 (USD)

Analyst Data

In the Stockcalc database there are 2 analysts that provide a valuation for MCK:NYS. The 2 analysts have a concensus valuation for MCK:NYS for 2020 of $121.00 (USD).

MCK:NYS McKesson

Analyst Recommendation
Buy Hold Sell Rating
(of 5)
Guidance As Of
0 3 0 3.0000 Hold 2019-5-17

Current Price: 126.4 USD

Analyst Consensus
USD Millions 2020 2021 2022
Mean EPS 14.08 15.11 16.25
# EPS Analysts 4 2 2
Mean Revenue 221,929.10 226,933.90 233,189.00
# Revenue Analysts 3 2 2
Mean Target Price 121.00
Mean Cash Flow 19.83 22.34 23.86
Mean EBITDA 4,269.50 4,385.10 4,500.50
Mean Net Income 2,666.80 2,711.10 2,819.90
Mean Debt Outstanding 4,982.00 4,709.00 5,290.50
Mean Tax Rate
Mean Growth Rate -2.06
Mean Capital Expenditure 633.40 575.10 575.10

Explanation of Valuation Models

We have up to 6 valuation points for each company in the database.
The Discounted Cash Flow (DCF) valuation is a cash flow model where cash flow projections are discounted back to the present to calculate value per share. DCF is a common valuation technique especially for companies undergoing irregular cash flows such as resource companies (mining, forestry, oil and gas) going though price cycles or smaller companies about to generate cash flow (junior exploration companies, junior pharma, technology firms…).
The Price Comparables valuation is the result of valuing the company we are looking at on the basis of ratios from selected comparable companies: Price to Earnings, Price to Book, Price to Sales, Price to Cash Flow, Enterprise Value (EV) to EBITDA. Each of these ratios for the selected comparable companies are averaged and multiplied by the values for the company we are interested in to calculate a value per share for our selected company.
We have included the Other Comparables as a way to value companies that cannot be valued using Earnings based ratios. This technique is very useful for companies still experiencing negative cash flows such as mining exploration firms. We use Cash/Share, Book Value/Share, MarketCap, 1 Year Return, NetPPE as the ratios here. Each of these ratios for the selected comparable companies are averaged and multiplied by the values for the company we are interested in to calculate a value per share for our selected company.
Multiples are similar to Price comparables where we look at current or historic ratios for the company in question to assess what it should be worth today based on those historic ratios. We use the same 5 ratios as in the price comparables and value the company with its historic averages.
With Adjusted Book Value (ABV) we calculate the book value per share for the company based on its balance sheet and multiply that book value per share by its historical price to book ratio to calculate a value per share.
If we have Analyst coverage for the company we use the consensus target price here.

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