Breaking Down Cardinal Health, Inc. (CAH) Financial Health: Key Insights for Investors

Are you keeping a close watch on your investments in the healthcare sector? Have you considered how Cardinal Health's (CAH) financial performance could impact your portfolio? In fiscal year 2024, the company reported revenues of $226.8 billion, marking an 11% increase from fiscal year 2023. With non-GAAP diluted earnings per share (EPS) soaring to $7.53, a 29% increase, and operating cash flow reaching an all-time high of $3.8 billion, is this a stock you can afford to overlook? Dive in as we dissect the key financial insights that could shape your investment strategy.

Cardinal Health, Inc. (CAH) Revenue Analysis

Understanding Cardinal Health, Inc.'s (CAH) financial health requires a detailed look into its revenue streams. The company operates primarily through two main segments: Pharmaceutical and Specialty Solutions, and Global Medical Products and Distribution (GMPD). Additionally, 'Other' revenue includes Nuclear and Precision Health Solutions (NPHS), at-Home Solutions, and OptiFreight Logistics.

For the fiscal year 2024, Cardinal Health reported total sales of $226.8 billion, marking an 11% increase from the $205 billion in fiscal year 2023. This growth reflects strong operational execution and key strategic progress within the company’s portfolio.

Here's a breakdown of the primary revenue sources:

• Pharmaceutical and Specialty Solutions: This segment is a major revenue driver, focusing on the distribution of brand and specialty pharmaceuticals.
• Global Medical Products and Distribution (GMPD): This segment includes the distribution of medical products in the U.S. and internationally.
• Other: This includes at-Home Solutions, Nuclear and Precision Health Solutions, and OptiFreight Logistics.

Analyzing the year-over-year revenue growth rate provides insights into the company's performance:

• Fiscal year 2024 revenue was $226.8 billion, an 11% increase from fiscal year 2023.
• Fiscal year 2023 revenue was $205 billion, a 13.04% increase from fiscal year 2022.
• Fiscal year 2022 revenue was $181.3 billion, an 11.61% increase from fiscal year 2021.

The contribution of different business segments to overall revenue can be further detailed by looking at the fourth quarter of fiscal year 2024:

• The Pharmaceutical and Specialty Solutions segment revenue was $55.6 billion, a 13% increase year-over-year.
• The Global Medical Products and Distribution (GMPD) segment revenue was $3.1 billion, a 2% increase year-over-year.
• Revenue for 'Other' was $1.2 billion, a 15% increase year-over-year.

Here is a table summarizing the segment information for Q4 FY24:

Significant changes in revenue streams also merit attention. For instance, the expiration of a contract with a top customer, Optimum, impacted the first quarter sales of fiscal year 2025. Excluding this, the company would have seen double-digit annual growth. Strategic decisions, such as the enhanced focus on specialty and investments in Nuclear and Precision Health Solutions, also play a role in revenue stream evolution.

Access more insights on Cardinal Health, Inc.'s (CAH) financial performance here: Breaking Down Cardinal Health, Inc. (CAH) Financial Health: Key Insights for Investors

Cardinal Health, Inc. (CAH) Profitability Metrics

Analyzing Cardinal Health, Inc.'s (CAH) profitability involves looking at several key metrics that provide insights into the company's financial health and operational efficiency. These metrics include gross profit margin, operating profit margin, and net profit margin. Additionally, it's important to assess the trends in these ratios over time and compare them against industry averages to gauge Cardinal Health's competitive positioning.

Here's a breakdown of Cardinal Health's profitability:

• Gross Profit Margin: Gross profit is calculated by deducting the cost of goods sold (COGS) from the total revenue. The gross profit margin is then derived by dividing the gross profit by the total revenue and is expressed as a percentage. This metric indicates how efficiently a company manages its production costs.
• Operating Profit Margin: The operating profit margin is determined by dividing a company's operating income by its revenue. Operating income is earnings before interest and taxes (EBIT). A higher operating margin is generally better, as it indicates the company can sell its products or services for more than their production costs.
• Net Profit Margin: Net profit margin is net income as a percentage of total sales revenue.

In the most recent financial data, Cardinal Health's profitability metrics show the following:

• For the quarter ending December 31, 2024, the gross margin was 3.57%.
• The operating margin at the end of 2024 was 0.53%.
• The net profit margin for the quarter ending December 31, 2024, stood at 0.59%.

A historical view of these margins reveals trends over recent years:

• Gross Margin Trends:
  • The average gross margin for 2023 was 3.34%, a 2.91% increase from 2022.
  • In 2022, the average gross margin was 3.44%, which was a 13.35% decrease from 2021.
  • The average gross margin in 2021 was 3.97%, a 10.99% decrease from 2020.
• Net Profit Margin Trends:
  • The average net profit margin for 2023 was 0.21%, a 136.21% increase from 2022.
  • The average net profit margin for 2022 was -0.58%, a 209.43% decline from 2021.
  • In 2021, the average net profit margin was 0.53%, a 158.24% decline from 2020.

Here is a table summarizing Cardinal Health's Gross Profit, Revenue, and Margin over the last five fiscal years:

When comparing Cardinal Health's gross profit margin to its competitors, recent data shows:

• Cencora Inc: 3.3%
• McKesson Corporation: 3.8%

These comparisons help to contextualize Cardinal Health's efficiency relative to its main competitors.

For additional insights, explore Exploring Cardinal Health, Inc. (CAH) Investor Profile: Who’s Buying and Why?.

Cardinal Health, Inc. (CAH) Debt vs. Equity Structure

Understanding how Cardinal Health, Inc. (CAH) finances its operations and growth is crucial for investors. This involves looking at the company's debt levels, its debt-to-equity ratio, and how it strategically uses debt and equity.

Cardinal Health's financial strategy includes a mix of debt and equity to fund its operations and growth initiatives. As of the quarter ended March 31, 2024, Cardinal Health had total assets of $57.453 billion and total liabilities of $44.928 billion. Stockholders equity was $12.525 billion.

Here’s a closer look at Cardinal Health, Inc.'s (CAH) debt profile:

• Long-term Debt: As of March 31, 2024, Cardinal Health's long-term debt stands at $3.343 billion. This indicates the amount of debt the company has due beyond one year, reflecting its long-term financial obligations.
• Short-term Debt: The company's short-term debt, representing obligations due within a year, is reported as $7.482 billion for the same period.

The debt-to-equity ratio is a key metric used to assess a company's financial leverage. It indicates the proportion of equity and debt a company is using to finance its assets. As of March 2024, Cardinal Health Inc.'s debt-to-equity ratio can be calculated using the following values from their balance sheet:

• Total Liabilities: $44.928 billion
• Total Stockholders Equity: $12.525 billion

The Debt to Equity Ratio is 3.59. This ratio suggests that Cardinal Health has a substantial amount of debt compared to its equity. A high ratio can indicate higher financial risk, as the company relies more on debt to finance its assets, which could make it vulnerable during economic downturns.

Recent events, like debt issuances or refinancing activities, can significantly impact Cardinal Health's capital structure. While specific details on recent debt issuances, credit ratings, or refinancing activities were not available in the provided search results, such activities are a normal part of financial management for large corporations. Investors can typically find these details in the company's financial reports and investor relations releases.

Cardinal Health strategically balances debt and equity to optimize its capital structure. The decision to use debt or equity depends on various factors, including market conditions, interest rates, and the company's financial goals. Debt financing can provide tax advantages due to the deductibility of interest expenses, but it also increases financial risk. Equity financing, on the other hand, does not create a repayment obligation but can dilute existing shareholders' ownership.

Here is a table summarizing key balance sheet data for Cardinal Health, Inc. as of March 31, 2024:

To gain more insights into Cardinal Health, Inc. (CAH) financial health, check this out: Breaking Down Cardinal Health, Inc. (CAH) Financial Health: Key Insights for Investors

Cardinal Health, Inc. (CAH) Liquidity and Solvency

Understanding Cardinal Health, Inc.'s financial health requires a close look at its liquidity and solvency. Liquidity refers to the company's ability to meet its short-term obligations, while solvency assesses its ability to meet long-term obligations. Let's delve into key financial metrics to evaluate Cardinal Health's financial standing as of the 2024 fiscal year.

Assessing Cardinal Health, Inc.'s Liquidity:

Analyzing liquidity involves examining the current and quick ratios, working capital trends, and cash flow statements.

• Current and Quick Ratios: These ratios provide insight into Cardinal Health's ability to cover its short-term liabilities with its short-term assets.

The current ratio is calculated by dividing current assets by current liabilities. For the quarter ended March 2024, Cardinal Health's current ratio stood at 1.03. A ratio above 1.0 generally indicates good liquidity.

The quick ratio, which excludes inventories from current assets, offers a more conservative view. Cardinal Health's quick ratio for the same period was 0.27, suggesting a reliance on inventory to meet short-term obligations.

• Analysis of Working Capital Trends: Working capital, defined as current assets minus current liabilities, is a vital measure of a company's operational efficiency and short-term financial health.

Cardinal Health's working capital as of March 2024, was $1.29 billion. Monitoring the trend of working capital helps identify whether the company is efficiently managing its short-term assets and liabilities.

• Cash Flow Statements Overview: A review of cash flow statements reveals the trends in operating, investing, and financing activities.

In the most recent quarter, Cardinal Health's net cash from operating activities was $768 million. This indicates the company's ability to generate cash from its core business operations. Investing activities showed a net cash outflow of $170 million, reflecting investments made by the company. Financing activities resulted in a net cash outflow of $614 million, primarily due to share repurchases and dividend payments.

Solvency Assessment:

Solvency is crucial for understanding Cardinal Health's long-term financial stability. Key indicators include debt-to-equity ratio and interest coverage ratio.

• Debt-to-Equity Ratio: This ratio measures the proportion of debt and equity used to finance the company's assets.

As of March 2024, Cardinal Health's debt-to-equity ratio was 2.37. This indicates a relatively high level of debt compared to equity.

• Interest Coverage Ratio: This ratio assesses the company's ability to pay interest on its outstanding debt.

Cardinal Health's interest coverage ratio for the quarter ended March 2024 was 4.77. A higher ratio suggests that the company can comfortably meet its interest obligations.

Potential Liquidity Concerns or Strengths:

While Cardinal Health demonstrates strong cash flow from operating activities, its low quick ratio and high debt-to-equity ratio could raise concerns. Effective management of inventory and debt will be critical for maintaining financial health. The company's ability to generate consistent operating cash flow remains a significant strength.

Here's a summary table of Cardinal Health's key financial metrics:

For more insights, check out: Breaking Down Cardinal Health, Inc. (CAH) Financial Health: Key Insights for Investors

Cardinal Health, Inc. (CAH) Valuation Analysis

Determining whether Cardinal Health, Inc. (CAH) is overvalued or undervalued requires a multifaceted approach, incorporating key financial ratios, stock performance analysis, and expert opinions. Let's delve into the critical metrics that provide a snapshot of Cardinal Health's current valuation. You can also read more about Cardinal Health, Inc. (CAH) Financial Health: Key Insights for Investors here: Breaking Down Cardinal Health, Inc. (CAH) Financial Health: Key Insights for Investors

Here's a breakdown of essential valuation indicators:

• Price-to-Earnings (P/E) Ratio: This ratio indicates how much investors are willing to pay for each dollar of Cardinal Health’s earnings. A higher P/E ratio might suggest overvaluation, while a lower one could indicate undervaluation, relative to industry peers or Cardinal Health's historical average.
• Price-to-Book (P/B) Ratio: The P/B ratio compares Cardinal Health’s market capitalization to its book value of equity. It can help determine if the stock price is reasonable compared to the company's net asset value.
• Enterprise Value-to-EBITDA (EV/EBITDA) Ratio: This ratio assesses Cardinal Health’s total value (equity plus debt) against its earnings before interest, taxes, depreciation, and amortization (EBITDA). It provides a more comprehensive valuation measure, especially useful when comparing companies with different capital structures.

Analyzing Cardinal Health, Inc. (CAH)'s stock price trends over the past year or longer provides context on market sentiment and investor confidence. A consistent upward trend may reflect positive expectations, while a downward trend could signal concerns about the company's performance or industry outlook.

If Cardinal Health, Inc. (CAH) distributes dividends, the dividend yield (annual dividend per share divided by the stock price) indicates the return on investment from dividends alone. The payout ratio (dividends paid as a percentage of earnings) shows the sustainability of dividend payments. These metrics are crucial for income-focused investors.

Monitoring analyst consensus on Cardinal Health, Inc. (CAH)'s stock valuation—whether it's rated as a buy, hold, or sell—offers insights into how financial experts perceive the stock's potential. Analyst target prices can also provide a benchmark for where the stock price is expected to move.

To illustrate, consider a hypothetical snapshot of Cardinal Health, Inc. (CAH)'s valuation metrics:

These data points, when considered together, can assist investors in forming a well-rounded opinion on whether Cardinal Health, Inc. (CAH) is currently trading at a fair value. Always consider these metrics in the context of Cardinal Health's industry, historical performance, and overall market conditions.

Cardinal Health, Inc. (CAH) Risk Factors

Cardinal Health, Inc. (CAH) faces a variety of internal and external risks that could significantly impact its financial health. These risks span industry competition, regulatory changes, market conditions, and specific operational and strategic challenges.

Here's an overview of some key risk factors:

• Industry Competition: The pharmaceutical distribution and healthcare services industries are highly competitive. Cardinal Health competes with other large distributors, manufacturers, and healthcare service providers. Increased competition could lead to decreased market share and reduced profitability.
• Regulatory Changes: The healthcare industry is heavily regulated. Changes in laws and regulations, such as those related to pricing, reimbursement, and healthcare reform, can significantly affect Cardinal Health's operations and financial results. For instance, government efforts to control drug prices could reduce the company's revenue.
• Market Conditions: Economic downturns, changes in healthcare spending, and shifts in pharmaceutical demand can all impact Cardinal Health's financial performance. Reduced healthcare spending or decreased demand for pharmaceuticals could negatively affect revenue and earnings.

Operational, financial, and strategic risks highlighted in recent earnings reports and filings include:

• Litigation and Legal Risks: Cardinal Health faces ongoing litigation related to the distribution of opioids. The financial impact of these legal challenges could be substantial, including significant settlements, fines, and legal fees.
• Supply Chain Disruptions: Disruptions in the supply chain, whether due to geopolitical events, natural disasters, or other factors, can impact the availability and cost of products. These disruptions can lead to decreased revenue and increased expenses.
• Information Technology Systems: Cardinal Health relies heavily on IT systems. Cyberattacks, system failures, or other IT-related issues could disrupt operations, compromise data security, and result in financial losses.
• Debt and Financing Risks: As of the 2024 fiscal year, Cardinal Health carries a significant amount of debt. The company’s ability to meet its debt obligations depends on its future financial performance, which is subject to various economic and market conditions. High levels of debt could also limit the company's ability to invest in growth opportunities.

Mitigation strategies and plans that Cardinal Health employs to address these risks may include:

• Compliance Programs: Implementing robust compliance programs to adhere to regulatory requirements and mitigate legal risks.
• Supply Chain Diversification: Diversifying the supply chain to reduce reliance on single sources and minimize the impact of disruptions.
• Cybersecurity Measures: Investing in advanced cybersecurity measures to protect IT systems and data from cyber threats.
• Financial Risk Management: Employing financial risk management strategies to manage debt levels and interest rate exposure.

For more insights into Cardinal Health's mission, vision, and core values, visit: Mission Statement, Vision, & Core Values of Cardinal Health, Inc. (CAH).

Cardinal Health, Inc. (CAH) Growth Opportunities

Cardinal Health, Inc. (CAH) faces a dynamic future, influenced by several growth drivers, strategic initiatives, and competitive advantages. An analysis of these factors is crucial for investors seeking to understand the company's potential trajectory.

Key growth drivers for Cardinal Health include:

• Product Innovation: Investments in innovative healthcare solutions and services, including specialty pharmaceuticals and patient care products, can drive revenue growth.
• Market Expansion: Expanding into new geographic markets and customer segments, both domestically and internationally, represents a significant growth opportunity.
• Acquisitions and Partnerships: Strategic acquisitions and partnerships can broaden Cardinal Health's product portfolio, enhance its market position, and create synergies.

Revenue growth projections and earnings estimates for Cardinal Health are subject to various market conditions and company-specific factors. Based on the fiscal year 2024, Cardinal Health reported revenue of $222.5 billion. Future growth will likely be influenced by the company's ability to capitalize on the aforementioned growth drivers.

Strategic initiatives and partnerships that may propel future growth include:

• Healthcare Technology: Leveraging technology to improve supply chain efficiency, enhance patient outcomes, and streamline healthcare delivery.
• Specialty Pharmacy Services: Expanding specialty pharmacy services to meet the growing demand for specialized medications and patient support.
• Data Analytics: Utilizing data analytics to optimize operations, personalize healthcare, and identify new growth opportunities.

Cardinal Health possesses several competitive advantages that position it for sustained growth:

• Scale and Scope: Cardinal Health's extensive distribution network and broad product portfolio provide a significant competitive edge.
• Customer Relationships: Strong relationships with healthcare providers, pharmacies, and hospitals create a stable customer base and recurring revenue streams.
• Supply Chain Expertise: Deep expertise in supply chain management enables Cardinal Health to optimize costs, improve efficiency, and ensure reliable product delivery.

For insights into the company's guiding principles, refer to: Mission Statement, Vision, & Core Values of Cardinal Health, Inc. (CAH).

To provide a clearer picture, consider the following hypothetical projections and strategic initiatives:

These initiatives, combined with Cardinal Health's existing strengths, could contribute to a positive growth trajectory in the coming years.