Cardinal Health, Inc. (CAH), McKesson Corporation (MCK): The Search for Good Prescription Drug Value

Struggling to make a deal

AmerisourceBergen Corp. (NYSE:ABC) is intriguing because it came about through a merger of two companies that McKesson and Cardinal Health tried to purchase. With roughly $81 billion in annual revenue, AmerisourceBergen Corp. (NYSE:ABC) is the largest company headquartered in Pennsylvania. The company also has a wide network that includes acute care centers, doctors’ offices, clinics and retail pharmacies.

Unfortunately, this might not all be enough even put together. With only a 0.7% profit margin and no significant scandals in its recent history, anything that goes wrong in the future could cause serious issues for AmerisourceBergen Corp. (NYSE:ABC). Also, despite massive sales, the company is trading for more than 5 times its book value and more than 23 times its earnings. In short, the company is just not a good buy at its price as of this writing.

The Foolish bottom line

The distribution networks for prescriptions, over-the-counter drugs and medical equipment sound like a cash cow. Unfortunately, the complications of keeping such systems together make profitability a hard row to hoe. As of this moment, I don’t see any great deals in this sector.

The article The Search for Good Prescription Drug Value originally appeared on Fool.com and is written by Chris Hodge.

Chris Hodge has no position in any stocks mentioned. The Motley Fool recommends McKesson. Chris is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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