Over the past six months, Cencora’s stock price fell to $287.06. Shareholders have lost 15.8% of their capital, which is disappointing considering the S&P 500 has climbed by 6.2%. This was partly due to its softer quarterly results and may have investors wondering how to approach the situation.
Given the weaker price action, is this a buying opportunity for COR? Find out in our full research report, it’s free.
Why Is Cencora a Good Business?
Formerly known as AmerisourceBergen until its 2023 rebranding, Cencora (NYSE: COR) is a global pharmaceutical distribution company that connects manufacturers with healthcare providers while offering logistics, data analytics, and consulting services.
1. Economies of Scale Give It Negotiating Leverage with Suppliers
Larger companies benefit from economies of scale, where fixed costs like infrastructure, technology, and administration are spread over a higher volume of goods or services, reducing the cost per unit. Scale can also lead to bargaining power with suppliers, greater brand recognition, and more investment firepower. A virtuous cycle can ensue if a scaled company plays its cards right.
With $328.7 billion in revenue over the past 12 months, Cencora is one of the most scaled enterprises in healthcare. This is particularly important because health insurance providers companies are volume-driven businesses due to their low margins.
2. Outstanding Long-Term EPS Growth
Analyzing the long-term change in earnings per share (EPS) shows whether a company’s incremental sales were profitable — for example, revenue could be inflated through excessive spending on advertising and promotions.
Cencora’s EPS grew at 14.6% compounded annual growth rate over the last five years, higher than its 10.9% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.
3. Stellar ROIC Showcases Lucrative Growth Opportunities
Growth gives us insight into a company’s long-term potential, but how capital-efficient was that growth? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).
Cencora’s five-year average ROIC was 50.4%, placing it among the best healthcare companies. This illustrates its management team’s ability to invest in highly profitable ventures and produce tangible results for shareholders.
Final Judgment
These are just a few reasons Cencora is a high-quality business worth owning. With the recent decline, the stock trades at 15.3× forward P/E (or $287.06 per share). Is now the time to initiate a position? See for yourself in our comprehensive research report, it’s free.
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