Cardinal Health (NYSE: CAH) and Walgreens Boots Alliance (NASDAQ:WBA) are both large-cap medical companies, but which is the superior stock? We will contrast the two companies based on the strength of their valuation, dividends, earnings, analyst recommendations, profitability, institutional ownership and risk.

Profitability

This table compares Cardinal Health and Walgreens Boots Alliance’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Cardinal Health 0.84% 25.24% 4.43%
Walgreens Boots Alliance 3.45% 18.36% 7.73%

Insider and Institutional Ownership

88.5% of Cardinal Health shares are held by institutional investors. Comparatively, 61.4% of Walgreens Boots Alliance shares are held by institutional investors. 1.0% of Cardinal Health shares are held by insiders. Comparatively, 14.8% of Walgreens Boots Alliance shares are held by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company will outperform the market over the long term.

Analyst Ratings

This is a summary of recent ratings and price targets for Cardinal Health and Walgreens Boots Alliance, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Cardinal Health 1 10 4 0 2.20
Walgreens Boots Alliance 0 8 12 0 2.60

Cardinal Health presently has a consensus target price of $73.30, suggesting a potential upside of 21.64%. Walgreens Boots Alliance has a consensus target price of $85.94, suggesting a potential upside of 19.35%. Given Cardinal Health’s higher probable upside, research analysts clearly believe Cardinal Health is more favorable than Walgreens Boots Alliance.

Dividends

Cardinal Health pays an annual dividend of $1.85 per share and has a dividend yield of 3.1%. Walgreens Boots Alliance pays an annual dividend of $1.60 per share and has a dividend yield of 2.2%. Cardinal Health pays out 53.8% of its earnings in the form of a dividend. Walgreens Boots Alliance pays out 42.3% 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. Cardinal Health has increased its dividend for 12 consecutive years. Cardinal Health is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Valuation and Earnings

This table compares Cardinal Health and Walgreens Boots Alliance’s revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Cardinal Health $129.98 billion 0.15 $1.29 billion $3.44 17.52
Walgreens Boots Alliance $118.21 billion 0.60 $4.08 billion $3.78 19.05

Walgreens Boots Alliance has lower revenue, but higher earnings than Cardinal Health. Cardinal Health is trading at a lower price-to-earnings ratio than Walgreens Boots Alliance, indicating that it is currently the more affordable of the two stocks.

Risk and Volatility

Cardinal Health has a beta of 0.85, indicating that its share price is 15% less volatile than the S&P 500. Comparatively, Walgreens Boots Alliance has a beta of 1.22, indicating that its share price is 22% more volatile than the S&P 500.

Summary

Walgreens Boots Alliance beats Cardinal Health on 11 of the 17 factors compared between the two stocks.

Cardinal Health Company Profile

Cardinal Health, Inc. is a healthcare services and products company. The Company operates through two segments: Pharmaceutical and Medical. The Pharmaceutical segment distributes branded and generic pharmaceutical, specialty pharmaceutical, over-the-counter healthcare and consumer products. This segment also operates nuclear pharmacies and cyclotron facilities; provides pharmacy management services to hospitals, as well as medication therapy management and patient outcomes services to hospitals, other healthcare providers and payers, and provides services to healthcare companies. The Medical segment distributes a range of medical, surgical and laboratory products, and provides services to hospitals, ambulatory surgery centers, clinical laboratories and other healthcare providers. This segment also manufactures, sources and develops its own Cardinal Health brand medical and surgical products. It provides post-acute care management and transition services, and software to hospitals.

Walgreens Boots Alliance Company Profile

Walgreens Boots Alliance, Inc. (Walgreens Boots Alliance) is a holding company. The Company is a global pharmacy-led, health and wellbeing enterprise. Walgreens Boots Alliance operates through three divisions, including Retail Pharmacy USA, Retail Pharmacy International and Pharmaceutical Wholesale. The Company’s products are marketed under a number of brands, which include No7, the Botanics range, Almus (generic medicines), Boots Pharmaceuticals and Soap & Glory (bathing and beauty brand). In addition, the Company has investments in Guangzhou Pharmaceuticals Corporation and Nanjing Pharmaceutical Company Limited. The Company operates in around 25 countries, which include the wholesale and distribution network with over 340 distribution centers and more than 180,000 pharmacies, health centers and hospitals in 19 countries.

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