Cardinal Health, Inc. (CAH): what the price requires
At today's price, Cardinal Health, Inc. (CAH) is priced for +5.9% growth. boothcheck doesn't publish a fair value or a price target; it shows what the price assumes, so you can judge whether that bar is too high.
Generated: 2026-07-14 · Exported: 2026-07-16 · Source: https://boothcheck.com/report/CAH
Headline
| Field | Value |
|---|---|
| Ticker | CAH |
| Company | Cardinal Health, Inc. |
| Current price | $233.88/sh |
| Composition | Pharmaceutical and Specialty Solutions 92% / Global Medical Products and Distribution 6% / Nuclear and Precision Health Solutions 1% / at-Home Solutions 2% / OptiFreight Logistics 0% / Corporate 0% |
What The Price Requires (Inversion)
The assumption today's price embeds, recovered by inverting the valuation.
| Field | Value |
|---|---|
| Inversion basis | whole-company |
| Operating margin needed | 0.4% |
| Operating margin today | 1.1% |
| Margin compression implied | -0.7pp |
| Implied growth | 5.9% |
| Multiple paid | 23x operating income |
The operating-margin requirement is derived from the framework's value band at year 12, a separately labeled basis from the headline growth/duration solve.
Solve inputs: computed at a 7.3% cost of capital with 4% terminal growth over a 5-year stage; each 1pp of cost of capital moves the implied operating-profit growth ~7.5pp.
Reconcile: at the x-ray's 9.3% required return this reads ~18.8%/yr; the models below use their own rates.
How unusual the bet is: within-range
| Reference | Value |
|---|---|
| vs own history | +0.17σ |
| cohort percentile (of 112 peers) | 58 |
| implied end-window share | 1% |
Valuation X-Ray
The price is supported by earnings-power value, while relative-multiple lands below the price. A value/asset-supported name, not a pure growth bet.
How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.
| Family | Median price/FV | Models | Reads |
|---|---|---|---|
| Asset | — | 0 | — |
| Earnings | 1.08x | 2 | expensive |
| Relative | 1.63x | 2 | expensive |
| Growth | — | 0 | — |
Families that justify the price: Earnings Families that call it expensive: Relative
The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 8.1%); the inversion above states its own rate.
Per-Model Detail (n=4)
| Model | Family | FV | Price/FV | Applicable | Methodology |
|---|---|---|---|---|---|
| DCF Perpetual Growth | Growth | $841.70 | 0.28x | no | FCF base $5.8B, growth 10% (input: historical growth), terminal g 4.0%, WACC 8.1%, 6yr projection |
| DCF Exit Multiple | Growth | $433.64 | 0.54x | no | Exit EV/EBITDA: 18.6x / 20.6x / 22.6x (bear / base = today's held flat / bull), 6yr |
| Relative Valuation | Relative | $166.65 | 1.40x | yes | P/E 22.61x (blended: static sector reference 18x + trailing (TTM) 33x), scenarios: 18.8x / 22.6x / 26.4x (bear / base = reference held flat / bull), EV/EBITDA 14.57x |
| Simple DDM | Growth | — | — | no | — |
| Two-Stage DDM | Growth | — | — | no | — |
| Simple Excess Return | Asset | — | — | no | — |
| Two-Stage Excess Return | Asset | — | — | no | — |
| Discounted Future Market Cap | Growth | $249.50 | 0.94x | no | Rev $244.7B, growth 10% (input: historical growth; tapered), Terminal P/S: 0.2x / 0.2x / 0.3x (bear / base = today's held flat / bull, cap 8x) |
| Growth-Adjusted P/E | Relative | — | — | no | — |
| Margin Trajectory | Growth | — | — | no | — |
| Earnings Power Value | Earnings | $33.65 | 6.95x | no | Normalized EBIT (5y avg op income, one-time charges added back) $1.39B × (1−25%) / WACC 8.1% → EPV (no growth) |
| Residual Income | Asset | — | — | no | — |
| Graham Number | Asset | — | — | no | — |
| EV/EBITDA Relative | Relative | $125.53 | 1.86x | yes | EBITDA $3.00B × sector EV/EBITDA 12.0x |
| FCF Yield | Earnings | $224.79 | 1.04x | yes | FCF $5506.0M / Kₑ 9.3% — zero-growth perpetuity |
| SBC-Adj FCF Yield | Earnings | $208.18 | 1.12x | yes | SBC-adj FCF $5.14B (FCF $5.51B − SBC $0.36B) capitalized at Kₑ |
| Ben Graham Formula | Earnings | $1.58 | 148.03x | yes | EPS $1.88 × (8.5 + 2×-5.0%) × (4.4 / 5.3%) (excluded from median) |
| ROIC-Justified P/B | Asset | — | — | no | — |
| P/Sales Sector | Relative | $2580.94 | 0.09x | no | Revenue $244.67B × sector P/S 2.5x |
| PEG Fair Value | Relative | — | — | no | — |
| Earnings Yield | Earnings | $20.32 | 11.51x | no | EPS $1.88 / required return 9.3% (Rf 4.3% + ERP 5.0%) |
| Funds From Operations Multiple | Relative | — | — | no | — |
| Clinical Phase NPV | Growth | — | — | no | — |
| Merton | Asset | — | — | no | — |
| V5 Mechanical | — | — | — | no | — |
Solvency
| Field | Value |
|---|---|
| Net debt | $6.5b |
| Net debt / NOPAT (after-tax) | 3.25x |
| Net debt / operating income (pre-tax) | 2.43x |
| Interest coverage | 9.6x |
| Share count CAGR (buyback) | -4.2% |
| Burning cash | no |
Bullet Takeaways
- Cardinal Health distributes a vast volume of drugs and medical products at a roughly 1% operating margin, a number that looks alarming until you see it is the whole point of the model, not a sign of weakness.
- The standout driver is specialty pharmaceuticals, especially oncology and GLP-1 weight-loss drugs, where segment growth above 20% is pulling the entire company higher and offsetting the loss of a major customer contract.
- What to watch is whether the medical-products segment turnaround holds and whether the string of specialty acquisitions integrates cleanly; management raised fiscal 2026 adjusted earnings guidance to $10.70 to $10.80 per share.
Bull Case
The reason a standard screen misreads Cardinal Health is the operating margin, which sits near 1% and looks like a business in trouble. It is the opposite. Pharmaceutical distribution is a high-velocity logistics business: Cardinal buys drugs from manufacturers and delivers them to pharmacies and hospitals, taking a sliver of each dollar but turning its capital over so many times that the return on the capital actually employed is high. The margin is thin by design because the value is in scale and throughput, not markup. Read the business through volume and segment profit instead, and the picture changes entirely: total revenue grew 11% to $61 billion in the fiscal third quarter of 2026, and the Pharmaceutical and Specialty Solutions segment, the core, grew profit 18% to $784 million.
The engine inside that engine is specialty, and it is where the growth is genuinely exciting. Specialty pharmaceuticals, the high-cost drugs for oncology and other complex conditions, plus the surge in GLP-1 weight-loss medications, are growing well above 20%, with oncology up more than 30% in the quarter and specialty revenue on track to exceed $50 billion for the year. These are the fastest-growing, most logistically demanding categories in the drug supply chain, and they play to exactly what a distributor of Cardinal's scale does best. The economics of the core distribution business also rest on a structural advantage the filing describes plainly: gross margin comes from the generic pharmaceutical program and from distribution-services agreements with branded manufacturers, with generics sourced through the "Red Oak Sourcing, LLC venture" with CVS Health, a joint buying operation that gives Cardinal purchasing scale few rivals can match.
Cardinal has also done the hard work of fixing its weak spot and redeploying cash into its strong one. The Global Medical Products and Distribution segment, long a drag with negative profit and cash flow, has turned the corner to positive on both, with the Cardinal-brand business growing 6% or more for consecutive quarters. Meanwhile management has spent on specialty platforms, including stakes in oncology and gastroenterology networks and a $1.9 billion deal for a urology group, building density in the highest-value parts of healthcare delivery, while still returning more than $3 billion to shareholders and shrinking the share count at roughly a 4% annual pace. The combination of a fixed medical segment, an accelerating specialty business, and steady buybacks is why management raised full-year adjusted earnings guidance to $10.70 to $10.80, implying roughly 30% growth.
Bear Case
The bear case is clearest in how the valuation methods split, because the disagreement is unusually stark and the relative lens is the one waving a flag. The earnings-power and cash-flow methods land right around today's price, but the peer-multiple methods land well below it, marking the stock as expensive against its own sector and placing it in the upper half of the peer multiple range. When a low-margin distributor with razor-thin economics trades at a premium to its distribution peers, the conservative reading is that the recent specialty-driven growth has pulled the multiple up faster than the durability of that growth justifies. The price is paying for the acceleration to continue, and the relative methods are saying it has already paid in full.
The customer-concentration risk is the structural fragility underneath. A distributor's revenue is concentrated in a handful of enormous customers, and Cardinal just lived through the consequences: the expiration of its OptumRx contract with UnitedHealth, which had contributed a significant share of total revenue, was a large hole the company had to fill. It found new customers, but the episode is a reminder that a single contract loss can swing the top line by double digits, and the next renegotiation with a large pharmacy or insurer carries the same risk. The 10-K notes that credit and customer risk in the business turn on reimbursement and economic pressures across the healthcare sector, forces Cardinal does not control.
The regulatory and balance-sheet pressures complete the case. Drug-pricing policy is a live threat: the company's own filing flags that a federal initiative on "Most-Favored Nation Prescription Drug Pricing" may affect the sales or profitability of branded pharmaceutical products, and a distributor's economics are sensitive to how branded margins and reimbursement evolve. On the balance sheet, Cardinal carries about $6.5 billion of net debt, roughly two and a half times trailing operating income, and it has been adding to its acquisition load with specialty deals, including the $1.9 billion urology purchase. Interest coverage near eight times is comfortable today, but the company is layering acquisition integration risk on top of a business whose growth depends on categories, specialty and GLP-1, that are themselves subject to pricing and policy shifts. The bear case is not that Cardinal is fragile now; it is that a premium multiple on a 1%-margin distributor leaves no room for a contract loss, a pricing-policy hit, or a specialty slowdown to disappoint.
Valuation
Cardinal Health is a distributor, so its 1% operating margin is the wrong number to anchor on; what matters is the segment profit it earns on enormous volume and the return on the modest capital that business actually requires. The stock trades near $222 (June 27, 2026), and inverting that price says the market is paying about 22 times company-wide operating income and expecting operating profit to grow roughly 5% a year for five years. That is a within-range assumption for a business that has recently been growing profit faster than that, so the price is not demanding a miracle; it is extrapolating the current momentum at a measured pace.
The methods used to triangulate the price disagree in a telling way. The earnings-power and free-cash-flow methods land close to the price, which makes sense for a steady cash generator: the business throws off real cash, and capitalizing that cash gets you to roughly where the stock trades. The peer-multiple methods, by contrast, land well below the price, flagging that Cardinal is valued richly relative to its distribution peers. The asset-based methods are not meaningful here, because years of buybacks and litigation reserves have left little or negative book equity, which is normal for a capital-light distributor and is why those lenses drop out. Read together, the pattern says the stock is supported by its cash generation but stretched on a relative basis, a value-and-momentum name where the premium rests on the specialty growth holding up.
Solvency is solid and supports the cash-return story. Net debt of about $6.5 billion is roughly two and a half times trailing operating income, with interest covered around eight times, comfortable coverage for a business with predictable, high-velocity cash flows. The company lifted its adjusted free cash flow guidance to $3.3 billion to $3.7 billion for the year, which funds both the specialty acquisitions and the buyback that has been steadily shrinking the share count. What a buyer at this price underwrites is that specialty and GLP-1 growth keeps the segment profit compounding, that the medical-products turnaround sticks, and that no large customer contract or drug-pricing change interrupts the cash flow, because at a premium to peers, the price has priced the good outcome.
Catalysts
Specialty growth is the catalyst that has rerated the stock, and the most recent quarter showed it accelerating. The Pharmaceutical and Specialty Solutions segment grew profit 18% to $784 million on 11% revenue growth, with specialty above 20%, oncology up more than 30%, and GLP-1 volumes contributing, and management expects specialty revenue to exceed $50 billion for the fiscal year. Continued strength in these categories is the single most important driver; any deceleration would test the premium the stock now carries.
The guidance trajectory has been a steady series of raises. Cardinal lifted and narrowed its fiscal 2026 non-GAAP earnings guidance to $10.70 to $10.80 per share, increased its pharma segment profit growth expectation to 22% to 23%, and raised adjusted free cash flow guidance to $3.3 billion to $3.7 billion. The pattern of upward revisions is itself a catalyst, and the next print is the test of whether it continues.
Two company-specific items bear watching. The Global Medical Products and Distribution turnaround has reached positive profit and cash flow after years of losses, with the Cardinal-brand business growing 6% or more, and sustaining that recovery would remove a long-standing drag. On capital deployment, the string of specialty acquisitions, including the $1.9 billion urology deal, alongside more than $3 billion returned to shareholders, will be judged on whether the deals integrate and earn their cost. The external risk to monitor is drug-pricing policy, where federal action on branded-drug pricing could affect the profitability of part of the distribution book.
Peer Cohorts (Per Segment, With Filing Citations)
Pharmaceutical and Specialty Solutions (reported)
- MCK (McKESSON CORPORATION)
- (no filing in the citation store)
- COR (CENCORA, INC.)
- (no filing in the citation store)
Global Medical Products and Distribution (reported)
- BDX (BECTON DICKINSON & CO)
- (no filing in the citation store)
- BAX (BAXTER INTERNATIONAL INC)
- (no filing in the citation store)
- ICUI (ICU MEDICAL INC/DE)
- (no filing in the citation store)
- MMSI (MERIT MEDICAL SYSTEMS INC)
- (no filing in the citation store)
- STE (STERIS plc)
- (no filing in the citation store)
Methodology Note
- Priced-in inversion: the valuation is inverted on the current price to recover the operating-income growth, duration, and steady-state margin the price embeds (ROE for financials, FFO growth for REITs).
- Valuation x-ray: the valuation models, grouped into four families (asset, earnings, relative, growth). Each model is expressed as a price/FV ratio (distance from price), not a point fair-value estimate. The spread across families is the disagreement.
- Solvency: net cash/debt, net-debt-to-NOPAT, interest coverage, and share-count CAGR from EDGAR financials (net debt / FFO and fixed-charge coverage for REITs; regulatory-capital framing for financials).
- Peer cohorts: per-segment comparables with deep-linkable SEC filing citations.
Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.
Sources
Cardinal Health Q3 FY2026 results · Cardinal Health FY2025 results · Cardinal Health FY2025 10-K