Stock Analysis & Valuation Cardinal Health, Inc. (0HTG.L)

• Previous Close: £213.10
• Sector Valuation Confidence Level: High

Valuation method	Value, £	Upside, %
Artificial intelligence (AI)	76.10	-64
Intrinsic value (DCF)	1379.87	548
Graham-Dodd Method		n/a
Graham Formula	31.60	-85

Strategic Investment Analysis

Company Overview

Cardinal Health, Inc. is a leading integrated healthcare services and products company operating in the United States, Canada, Europe, Asia, and internationally. Specializing in pharmaceutical and medical solutions, Cardinal Health serves hospitals, healthcare systems, pharmacies, ambulatory surgery centers, and clinical laboratories with a comprehensive portfolio of branded and generic pharmaceuticals, specialty drugs, and medical supplies. The company’s Pharmaceutical segment focuses on distribution, specialty pharmacy services, and medication therapy management, while its Medical segment manufactures and distributes Cardinal Health-branded medical, surgical, and laboratory products. With a strong supply chain infrastructure and a commitment to innovation, Cardinal Health plays a pivotal role in the healthcare sector, ensuring efficient delivery of critical medical products. Headquartered in Dublin, Ohio, the company has built a reputation for reliability and scale, making it a key player in the global healthcare distribution market.

Investment Summary

Cardinal Health presents a stable investment opportunity within the healthcare sector, supported by its diversified revenue streams and strong market position in pharmaceutical and medical distribution. The company’s $226.8 billion revenue and $3.45 diluted EPS reflect its operational scale, though net income of $852 million indicates thin margins typical of the distribution business. A low beta of 0.674 suggests lower volatility relative to the market, appealing to risk-averse investors. However, competitive pressures and regulatory risks in healthcare distribution could impact profitability. The dividend yield, supported by a $2.0224 per share payout, adds income appeal. Investors should weigh Cardinal Health’s steady cash flow ($3.76 billion operating cash flow) against its $5.09 billion debt load and capital-intensive operations.

Competitive Analysis

Cardinal Health’s competitive advantage lies in its extensive distribution network, strong relationships with healthcare providers, and diversified product portfolio. As one of the 'Big Three' U.S. pharmaceutical distributors (alongside McKesson and AmerisourceBergen), it benefits from economies of scale, enabling cost-efficient logistics and broad market reach. The company’s focus on specialty pharmaceuticals and value-added services (e.g., medication therapy management) differentiates it from pure-play distributors. However, its thin operating margins (reflected in modest net income relative to revenue) highlight the challenges of pricing power in a consolidated industry. Cardinal Health’s Medical segment provides additional diversification but faces stiff competition from larger medtech players. Its ability to integrate supply chain solutions for hospitals and clinics strengthens its positioning, though reliance on third-party manufacturers for branded products could pose risks. Regulatory scrutiny over drug pricing and distribution remains a persistent industry-wide challenge.

Major Competitors

• McKesson Corporation (MCK): McKesson is the largest U.S. pharmaceutical distributor by revenue, with a robust global footprint and a strong technology solutions division. Its scale and diversified services (including healthcare IT) give it an edge, but its broader exposure to lower-margin distribution may limit earnings growth compared to more specialized peers.
• AmerisourceBergen Corporation (ABC): AmerisourceBergen rivals Cardinal Health in pharmaceutical distribution, with a particularly strong specialty drugs segment. Its partnership with Walgreens Boots Alliance enhances its retail pharmacy reach, though dependence on a few large customers introduces concentration risk. Its margins are slightly better than Cardinal’s, but it faces similar regulatory headwinds.
• Cardinal Health, Inc. (CAH): Note: This is the primary listing of Cardinal Health (NYSE: CAH), which is cross-listed on the LSE as 0HTG.L. The company’s competitive positioning is identical to the analysis above.
• Henry Schein, Inc. (HSIC): Henry Schein specializes in dental and medical supplies, overlapping with Cardinal’s Medical segment but with a narrower focus. Its direct-to-dentist distribution model is a strength, though its smaller scale in pharmaceuticals limits its competitiveness against Cardinal’s broader portfolio.
• Owens & Minor, Inc. (OMI): Owens & Minor competes in medical supply distribution and logistics but lacks Cardinal’s pharmaceutical scale. Its recent struggles with profitability and restructuring efforts highlight the challenges of competing against larger, more diversified players like Cardinal Health.