CVS Health Corporation (NYSE: CVS) and McKesson Corporation (NYSE:MCK) are both large-cap retail/wholesale companies, but which is the superior business? We will compare the two businesses based on the strength of their valuation, earnings, risk, analyst recommendations, dividends, institutional ownership and profitabiliy.
Profitability
This table compares CVS Health Corporation and McKesson Corporation’s net margins, return on equity and return on assets.
| Net Margins | Return on Equity | Return on Assets | |
| CVS Health Corporation | 2.93% | 17.47% | 6.58% |
| McKesson Corporation | 2.42% | 25.76% | 4.34% |
Insider and Institutional Ownership
81.9% of CVS Health Corporation shares are held by institutional investors. Comparatively, 89.1% of McKesson Corporation shares are held by institutional investors. 0.6% of CVS Health Corporation shares are held by insiders. Comparatively, 1.2% of McKesson Corporation shares are held by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company is poised for long-term growth.
Dividends
CVS Health Corporation pays an annual dividend of $2.00 per share and has a dividend yield of 2.5%. McKesson Corporation pays an annual dividend of $1.12 per share and has a dividend yield of 0.7%. CVS Health Corporation pays out 39.9% of its earnings in the form of a dividend. McKesson Corporation pays out 5.0% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. CVS Health Corporation has raised its dividend for 4 consecutive years and McKesson Corporation has raised its dividend for 9 consecutive years.
Risk and Volatility
CVS Health Corporation has a beta of 0.91, indicating that its stock price is 9% less volatile than the S&P 500. Comparatively, McKesson Corporation has a beta of 1.13, indicating that its stock price is 13% more volatile than the S&P 500.
Analyst Ratings
This is a breakdown of recent ratings for CVS Health Corporation and McKesson Corporation, as provided by MarketBeat.
| Sell Ratings | Hold Ratings | Buy Ratings | Strong Buy Ratings | Rating Score | |
| CVS Health Corporation | 0 | 6 | 11 | 0 | 2.65 |
| McKesson Corporation | 1 | 8 | 7 | 0 | 2.38 |
CVS Health Corporation currently has a consensus target price of $91.64, indicating a potential upside of 15.80%. McKesson Corporation has a consensus target price of $169.50, indicating a potential upside of 12.20%. Given CVS Health Corporation’s stronger consensus rating and higher probable upside, analysts plainly believe CVS Health Corporation is more favorable than McKesson Corporation.
Earnings and Valuation
This table compares CVS Health Corporation and McKesson Corporation’s top-line revenue, earnings per share and valuation.
| Gross Revenue | Price/Sales Ratio | EBITDA | Earnings Per Share | Price/Earnings Ratio | |
| CVS Health Corporation | $180.79 billion | 0.45 | $12.32 billion | $5.01 | 15.80 |
| McKesson Corporation | $199.85 billion | 0.16 | $3.94 billion | $22.42 | 6.74 |
CVS Health Corporation has higher revenue, but lower earnings than McKesson Corporation. McKesson Corporation is trading at a lower price-to-earnings ratio than CVS Health Corporation, indicating that it is currently the more affordable of the two stocks.
Summary
CVS Health Corporation beats McKesson Corporation on 9 of the 17 factors compared between the two stocks.
About CVS Health Corporation
CVS Health Corporation, together with its subsidiaries, is an integrated pharmacy healthcare company. The Company provides pharmacy care for the senior community through Omnicare, Inc. (Omnicare) and Omnicare’s long-term care (LTC) operations, which include distribution of pharmaceuticals, related pharmacy consulting and other ancillary services to chronic care facilities and other care settings. It operates through three segments: Pharmacy Services, Retail/LTC and Corporate. The Pharmacy Services Segment provides a range of pharmacy benefit management (PBM) solutions to its clients. As of December 31, 2016, the Retail/LTC Segment included 9,709 retail locations (of which 7,980 were its stores that operated a pharmacy and 1,674 were its pharmacies located within Target Corporation (Target) stores), its online retail pharmacy Websites, CVS.com, Navarro.com and Onofre.com.br, 38 onsite pharmacy stores, its long-term care pharmacy operations and its retail healthcare clinics.
About McKesson Corporation
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.
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