CAH

We rate CARDINAL HEALTH INC (CAH) as a Hold with a composite score of 57.7/100 at a current price of $225.96. The stock presents a mixed quantitative picture — neither compelling enough to warrant new accumulation nor weak enough to justify selling for existing holders. Our factors are split, and the overall profile suggests patience is warranted.

The rating is primarily driven by strength in momentum (83th percentile) and stability (79th percentile), which together account for the majority of the composite score. Offsetting weakness in investment (28th percentile) and quality (45th percentile) tempers our overall conviction. We assign a No Moat rating (31/100), Low uncertainty, and Poor capital allocation.

Key items to watch: sustainability of the current growth rate. Any material change in these dynamics could warrant a reassessment of our rating. The moat trend is stable, which suggests the competitive landscape is stable for now.

CARDINAL HEALTH INC holds an above-average position (#16 of 50) within the Wholesale Trade sector, based on our composite quantitative scoring across quality, value, momentum, and stability factors. The composite score of 57.7/100 places it at rank #937 in our full 7,333-stock universe. With a $37.4B market capitalization, CARDINAL HEALTH INC operates at meaningful scale within the Wholesale Trade sector, providing competitive advantages in distribution, procurement, and customer reach.

The near-term outlook is constructive, with revenue growing at 26% and momentum in the 83th percentile confirming positive market sentiment and institutional accumulation. The combination of strong top-line growth and favorable price dynamics suggests the company is executing well on its growth strategy. Investment factor at the 28th percentile indicates reinvestment patterns that investors should monitor for sustainability.

The margin cascade tells an important story: gross margins of 4% (-18.8pp vs sector) narrow to operating margins of 1% (-2.1pp vs sector) and net margins of 0.8%, yielding a gross-to-net conversion rate of 21%. This conversion rate is typical for the sector, suggesting a standard cost structure without notable efficiency advantages or disadvantages.

At a current price of $225.96, CARDINAL HEALTH INC is trading near fair value based on current fundamentals. Our value factor score of 49/100 reflects a composite assessment across multiple valuation metrics including price-to-earnings, price-to-book, EV/EBITDA, and price-to-sales ratios relative to both sector peers and the broader market. Valuation metrics are mixed, with no strong signal of mispricing in either direction.

The stock currently trades at a P/E of 28.8x (a 51% premium to the sector median of 19.1x), EV/EBITDA of 19.9x (at a premium), P/S of 0.2x. The above-sector P/E multiple suggests the market is pricing in superior growth or quality, which our analysis finds only partially justified by current fundamentals.

We assign a Low uncertainty rating to CARDINAL HEALTH INC. The company exhibits strong financial stability with a beta of 0.33, and a stability factor in the 79th percentile. The predictable nature of the business model and solid financial position reduce the range of potential outcomes, giving us confidence in our fair value estimate.

Specific risk factors that inform our assessment include: low beta of 0.33 — while defensive, this may indicate limited upside participation in bull markets. Each of these factors independently widens the distribution of potential outcomes, and in combination they create a risk profile that demands careful position sizing. The stability factor at the 79th percentile and quality factor at the 45th percentile provide a quantitative summary of the overall risk landscape.

Key risk mitigants include: above-average stability (79th percentile) suggests predictable business dynamics. These factors partially offset the identified risks and provide downside protection in adverse scenarios. On balance, the risk-reward profile is favorable for long-term investors.

We rate CARDINAL HEALTH INC's capital allocation as Poor. Key concerns include low returns on equity (-60.0%). Exemplary capital allocators generate ROE above 20% and maintain conservative leverage — CARDINAL HEALTH INC significantly underperforms these benchmarks, raising questions about management's ability to create shareholder value.

Investors should scrutinize management's reinvestment decisions and balance sheet trajectory before committing capital. Poor capital allocation often compounds over time: overlevered balance sheets limit strategic flexibility, while low returns on capital destroy shareholder value. We would need to see sustained improvement in profitability metrics and balance sheet discipline before considering an upgrade.

In summary, CARDINAL HEALTH INC receives a Hold rating with a composite score of 57.7/100 (rank #937 of 7,333). Our quantitative framework assigns a No Moat (31/100, trend: stable), Low uncertainty, and Poor capital allocation. The average factor score across quality, value, momentum, stability, and investment is 57/100.

Our analysis supports a neutral stance on CARDINAL HEALTH INC. While the quantitative profile is not weak enough to warrant selling, it lacks the multi-factor strength required for a buy recommendation. Existing holders should maintain positions and monitor for catalysts — either fundamental improvement or valuation compression — that would shift the risk-reward balance.