2016 is not good for Cardinal Health’s shareholders. Year to date shares are -13% and it is well below +5% of S&P 500. It is probably the weakest performer among The Dividend Aristocrats this year. Is business really going so bad?

I wrote about CAH twice and in my last note in May: I think that share price overreacted and time to buy is coming. Well you can obviously say that share price is at the same level as it was in May, but I can easily respond that my investable level is $73 (I do not know why I didn’t buy at the end of June, when share price was around $73), then shares went up to around $85 and come back. So if you were to invest in May then risk of losing money was low. How about now? How is business going?

First of all I see that on consensus company is traded at P/E = 12.3 for the next year and EV/EBITDA around 7.6. In my opinion it is cheap valuation, especially comparing to other aristocrats. On the other hand dividend yield of 2.4% (for next year) is just fair, but historically company didn’t pay high dividends. In peak it was around 2.7% in 2012. So all in all I find current valuation attractive, also as it comes to dividend yield.

Let’s look on FY2016 accomplishments:


Revenues, profits, cash flows – all record high. So really I do not understand why valuation is so low… and it is not a small growth, but double digit one!

Also outlook for 2017 is quite positive:


Altogether I think that shares of Cardinal Health have currently little downside potential. Obviously the main risk is what about drug prices in US, nevertheless company proved its’ quality many times and I think time to buy is coming. I wish some black swan session will come and I will buy at special price.


Disclaimer: CAH – no position