McKesson Corporation (NYSE: MCK) and Pharmerica Corporation (NYSE:PMC) are both medical companies, but which is the superior business? We will contrast the two businesses based on the strength of their analyst recommendations, earnings, institutional ownership, valuation, dividends, risk and profitabiliy.
Risk and Volatility
McKesson Corporation has a beta of 1.13, indicating that its stock price is 13% more volatile than the S&P 500. Comparatively, Pharmerica Corporation has a beta of 0.93, indicating that its stock price is 7% less volatile than the S&P 500.
Profitability
This table compares McKesson Corporation and Pharmerica Corporation’s net margins, return on equity and return on assets.
| Net Margins | Return on Equity | Return on Assets | |
| McKesson Corporation | 2.55% | 29.99% | 4.88% |
| Pharmerica Corporation | 0.98% | 11.03% | 4.84% |
Valuation & Earnings
This table compares McKesson Corporation and Pharmerica Corporation’s top-line revenue, earnings per share (EPS) and valuation.
| Gross Revenue | Price/Sales Ratio | EBITDA | Earnings Per Share | Price/Earnings Ratio | |
| McKesson Corporation | $198.53 billion | 0.18 | $4.35 billion | $23.34 | 7.18 |
| Pharmerica Corporation | $2.13 billion | 0.38 | $130.20 million | $0.67 | 38.88 |
McKesson Corporation has higher revenue and earnings than Pharmerica Corporation. McKesson Corporation is trading at a lower price-to-earnings ratio than Pharmerica Corporation, indicating that it is currently the more affordable of the two stocks.
Insider and Institutional Ownership
89.0% of McKesson Corporation shares are owned by institutional investors. Comparatively, 92.7% of Pharmerica Corporation shares are owned by institutional investors. 1.2% of McKesson Corporation shares are owned by insiders. Comparatively, 5.2% of Pharmerica Corporation shares are owned by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock will outperform the market over the long term.
Dividends
McKesson Corporation pays an annual dividend of $1.12 per share and has a dividend yield of 0.7%. Pharmerica Corporation does not pay a dividend. McKesson Corporation pays out 4.8% of its earnings in the form of a dividend. McKesson Corporation has increased its dividend for 4 consecutive years.
Analyst Recommendations
This is a breakdown of current recommendations for McKesson Corporation and Pharmerica Corporation, as provided by MarketBeat.
| Sell Ratings | Hold Ratings | Buy Ratings | Strong Buy Ratings | Rating Score | |
| McKesson Corporation | 1 | 9 | 6 | 0 | 2.31 |
| Pharmerica Corporation | 0 | 0 | 0 | 0 | N/A |
McKesson Corporation currently has a consensus price target of $169.50, suggesting a potential upside of 1.12%. Given McKesson Corporation’s higher probable upside, analysts clearly believe McKesson Corporation is more favorable than Pharmerica Corporation.
Summary
McKesson Corporation beats Pharmerica Corporation on 11 of the 16 factors compared between the two stocks.
McKesson Corporation Company Profile
McKesson Corporation (McKesson) is engaged in delivering pharmaceuticals, medical supplies and healthcare information technology. The Company operates through two segments: McKesson Distribution Solutions and Technology Solutions. The McKesson Distribution Solutions segment distributes drugs and equipment, and health and beauty care products across North America and internationally. The Distribution Solutions segment provides pharmaceutical solutions for biotech and pharmaceutical manufacturers, and practice management, technology, clinical support and business solutions to oncology and other specialty practices operating in the community setting. The Technology Solutions segment delivers clinical, patient care, financial, supply chain and strategic management software solutions, as well as connectivity, outsourcing and other services. Its McKesson Health Solutions portfolio includes ClarityQx, which is a payment technology.
Pharmerica Corporation Company Profile
PharMerica Corporation is an institutional pharmacy services company. The Company services healthcare facilities, provides pharmacy management services to hospitals and specialty infusion services to patients outside a hospital setting, and offers the national oncology pharmacy in the United States. Its segments include institutional pharmacy, which provides pharmacy products and services to residents and patients in skilled nursing facilities, nursing centers, assisted living facilities, hospitals and other long-term alternative care settings; specialty infusion services, which provides specialty infusion services focused on providing pharmaceutical products and clinical services to patients in client facilities, hospice and outside of hospital or nursing home settings, and specialty oncology pharmacy, which provides dispensing of oncology drugs, care management and other related services to patients, oncology practices and hospitals.
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