Cardinal Health Inc Valuation – July 2016 $CAH

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Companies Benjamin Graham Would Invest In Today - June 2016.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Cardinal Health Inc (CAH) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Cardinal Health, Inc. is a healthcare services and products company. The Company operates in two segments: Pharmaceutical and Medical. The Company also provides medical products to patients in the home. In the United States, the Company’s Pharmaceutical segment distributes branded and generic pharmaceutical, over-the-counter healthcare and consumer products through its Pharmaceutical Distribution division to retailers, hospitals and other healthcare providers. In China, the Pharmaceutical segment distributes branded, generic and specialty pharmaceutical, over-the-counter healthcare and consumer products, provides logistics, marketing and other services and operates direct-to-patient specialty pharmacies through Cardinal Health China. The Medical segment distributes a range of medical, surgical and laboratory products and provides services to hospitals, ambulatory surgery centers, clinical laboratories and other healthcare providers.


To read the details of this valuation, you must be logged in as a premium member. If you are not a premium member, please consider becoming one.

Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. Here is a free sample valuation pdf, and here is a post detailing what can be found within each individual company’s valuation.


Downloadable PDF version of this valuation:

ModernGraham Valuation of CAH – July 2016

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $25,745,700,701 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.15 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -1.04% Fail
6. Moderate PEmg Ratio PEmg < 20 22.75 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.86 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.15 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.79 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

CAH value chart July 2016

EPSmg $3.44
MG Growth Estimate 3.69%
MG Value $54.67
Opinion Overvalued
MG Grade C-
MG Value based on 3% Growth $49.90
MG Value based on 0% Growth $29.25
Market Implied Growth Rate 7.12%
Current Price $78.29
% of Intrinsic Value 143.19%

Cardinal Health Inc does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings growth over the last ten years, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the current assets. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $2.76 in 2012 to an estimated $3.44 for 2016. This level of demonstrated earnings growth does not support the market’s implied estimate of 7.12% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value below the price.

Cardinal Health Inc receives an average overall rating in the ModernGraham grading system, scoring a C-.

Stage 3: Information for Further Research

CAH charts July 2016

Net Current Asset Value (NCAV) -$15.26
Graham Number $45.15
PEmg 22.75
Current Ratio 1.15
PB Ratio 3.86
Current Dividend $1.55
Dividend Yield 1.98%
Number of Consecutive Years of Dividend Growth 20


Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 3/1/2016
Total Current Assets $22,291,000,000
Total Current Liabilities $19,385,000,000
Long-Term Debt $5,195,000,000
Total Assets $34,055,000,000
Intangible Assets $9,150,000,000
Total Liabilities $27,342,000,000
Shares Outstanding (Diluted Average) 331,000,000

Earnings Per Share History

Next Fiscal Year Estimate $4.40
Jun2015 $3.62
Jun2014 $3.38
Jun2013 $0.97
Jun2012 $3.06
Jun2011 $2.72
Jun2010 $1.77
Jun2009 $3.18
Jun2008 $3.57
Jun2007 $4.77
Jun2006 $2.33
Jun2005 $2.41
Jun2004 $3.35
Jun2003 $3.10
Jun2002 $2.30
Jun2001 $1.88
Jun2000 $1.59
Jun1999 $1.09
Jun1998 $0.99
Jun1997 $0.74
Jun1996 $0.51

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $3.44
Jun2015 $2.89
Jun2014 $2.48
Jun2013 $2.13
Jun2012 $2.76
Jun2011 $2.81
Jun2010 $2.94
Jun2009 $3.44
Jun2008 $3.47
Jun2007 $3.35
Jun2006 $2.66
Jun2005 $2.75
Jun2004 $2.76
Jun2003 $2.31
Jun2002 $1.80
Jun2001 $1.45
Jun2000 $1.15

Recommended Reading:

Other ModernGraham posts about the company

58 Companies in the Spotlight This Week – 1/31/15
Cardinal Health Inc. Annual Valuation – 2015 $CAH
14 Companies in the Spotlight This Week – 1/4/14
ModernGraham Valuation: Cardinal Health (CAH)

Other ModernGraham posts about related companies

Varian Medical Systems Inc Valuation – July 2016 $VAR
St. Jude Medical Inc Valuation – June 2016 $STJ
Zimmer Biomet Holdings Inc Valuation – June 2016 $ZBH
Waters Corporation Valuation – May 2016 $WAT
Align Technology Inc Valuation – May 2016 $ALGN
C.R. Bard Inc Stock Valuation – February 2016 $BCR
Psychemedics Corp Stock Valuation – February 2016 $PMD
Patterson Companies Inc Stock Valuation – February 2016 $PDCO
Edwards Lifesciences Corp Valuation – February 2016 $EW
Baxter International Inc Valuation – February 2016 $BAX


The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.