Cencora: Great Track Record And Outlook, But Valuation Does Not Offer Upside

Summary

• Cencora has a solid industry position in an oligopolistic market with supernormal return ratios and solid stock price returns.
• 1QFY25 results, as well as the near-term outlook, are also solid, with EPS guided by management to grow in the low double digits in FY25.
• Moreover, the company also has a decent long-term outlook, with management as well as analysts guiding EPS to grow at an 8-12% growth rate.
• Despite a solid growth outlook, Cencora's valuation looks to have factored in much of these tailwinds, which has led me to issue a hold rating on the stock.

Images By Tang Ming Tung

Introduction

Cencora (NYSE:COR) is one of the major pharmacy distributors in the US with ~30% market share. Other players in this industry include Cardinal Health and McKesson Corporation. Collectively, all three players control 90-95% of the market share. Naturally, with an oligopoly

Analyst’s Disclosure:I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.