Is McKesson a Good Investment?

PHOTO CREDIT: McKesson

OVERVIEW

McKesson Corporation is a company based in the United States. The company distributes medical and pharmaceutical equipment to hospitals and pharmacies around the world. The company also offers logistics and consultation services as well. The company was founded in 1833.

Why You Should?

  1. McKesson Corporation has been around for a very long time. Founded in 1833, the company has served millions of customers and has survived through the worst times (World Wars, Depressions, etc.). However, the fact that the company has been around for that long comes to show the strength of the business and the company in general.
  2. McKesson is an extremely low-risk investment in an investor’s portfolio due to the essential nature of the products that it distributes to its customers. In other words, McKesson will not see sales drop during tough economic times because people will still need healthcare services. Because of its low-risk nature, this investment option will benefit investors who are looking for a safe investment option during volatile times.
  3. McKesson will continue to see sales rise as the healthcare industry continues to grow. Overall, the healthcare industry has continued to grow year over year despite the negative economic impacts that the world has seen due to the pandemic. This safe and stable-growth will benefit the company and its investors.
  4. The company has seen rising revenues and profits over the past couple of financial years due to the reasons mentioned above. This has helped the company grow across all of its markets and has also allowed it to make new acquisitions (further growing the core business). This growth has also benefited investors in the company as well. In the financial year of 2020, the company reported revenues of around 231.05 billion and profits of 900 million. Both of these metrics are higher than what the company reported in the financial year of 2019 when they had revenues of around 214.32 billion and profits of around 32 billion.
PHOTO CREDIT: Yahoo Finance

Why You Should Not?

  1. McKesson faces tough competition in the healthcare distribution sector. Some of this competition includes AmerisourceBergen, Walgreens, and many others. This competition might hurt the company and its investors.
  2. McKesson faces a negative political environment in the United States. In Washington under a Biden administration, both parties might work together in order to lower the cost of healthcare for consumers. This might hurt McKesson as they might have to lower prices for their distribution services. This will also hurt investors in the company.
  3. McKesson operates an extremely low margin business. Though they are at the forefront in the healthcare distribution industry (in terms of profit margin), the company might report a loss if there is any headwind in their business. This risk of making a loss will hurt the company and its investors in the future.

MY OPINION

I think that McKesson is a great long-term investment due to its position as a low-risk investment, the strength of its core business, a growing healthcare industry, as well as rising revenues and profits. However, tough competition, a negative political environment, as well as a low margin business might hurt the company and its investors in the future.

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Aaditya Patel is a writer who publishes analysis on companies publicly traded on the NYSE. Follow him @the_investing787 on Instagram for summary posts.

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Aaditya Patel

Aaditya Patel

Aaditya Patel is a writer who publishes analysis on companies publicly traded on the NYSE. Follow him @the_investing787 on Instagram for summary posts.

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