Stock Analysis

Should McKesson (NYSE:MCK) Be Disappointed With Their 34% Profit?

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NYSE:MCK
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We believe investing is smart because history shows that stock markets go higher in the long term. But if when you choose to buy stocks, some of them will be below average performers. For example, the McKesson Corporation (NYSE:MCK), share price is up over the last year, but its gain of 34% trails the market return. Looking back further, the stock price is 32% higher than it was three years ago.

Check out our latest analysis for McKesson

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

Over the last twelve months McKesson went from profitable to unprofitable. While this may prove temporary, we'd consider it a negative, so we would not have expected to see the share price up. We might get a clue to explain the share price move by looking to other metrics.

We doubt the modest 0.9% dividend yield is doing much to support the share price. We think that the revenue growth of 5.6% could have some investors interested. Many businesses do go through a phase where they have to forgo some profits to drive business development, and sometimes its for the best.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

earnings-and-revenue-growth
NYSE:MCK Earnings and Revenue Growth March 17th 2021

McKesson is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. So it makes a lot of sense to check out what analysts think McKesson will earn in the future (free analyst consensus estimates)

A Different Perspective

McKesson shareholders are up 35% for the year (even including dividends). Unfortunately this falls short of the market return. The silver lining is that the gain was actually better than the average annual return of 5% per year over five year. This suggests the company might be improving over time. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Even so, be aware that McKesson is showing 1 warning sign in our investment analysis , you should know about...

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.

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