McKesson Corporation (MCK): A Bull Case Theory

Core Thesis - McKesson Corporation is viewed as a compelling investment opportunity due to its dominant position in U.S. pharmaceutical distribution, handling approximately one-third of all drugs in the country, which provides strong competitive advantages and steady cash flow [2][3] Valuation Metrics - As of September 12th, McKesson's share price was $711.42, with trailing and forward P/E ratios of 28.49 and 18.94 respectively [1] - The company is trading at 16.5 times free cash flow while growing earnings at about 13% annually, indicating an attractive risk/reward profile [3] Financial Performance - McKesson's current stock price allows for an investment of $10,000 to effectively purchase $607 of owner's earnings, expected to compound at approximately 8.6%, showcasing the company's undervaluation and resilience [4] - The company generates consistent free cash flow and has high returns on capital, making it a recession-resilient business [4] Growth Potential - Demographic tailwinds are expected to drive continued demand growth, and McKesson's strategic shift into higher-margin oncology services positions it for enhanced profitability over time [3] - Long-term investors may anticipate compounded wealth creation at an estimated rate of 10-12% annually, with minimal downside risk [3] Market Perception - The market is currently undervaluing McKesson by focusing on its thin 1% margins rather than its strong cash flow generation and returns on capital [2]