AmerisourceBergen Corporation (Holding Co) (NYSE: ABC) and McKesson Corporation (NYSE:MCK) are both large-cap medical companies, but which is the superior business? We will contrast the two companies based on the strength of their dividends, valuation, profitabiliy, institutional ownership, earnings, risk and analyst recommendations.

Volatility and Risk

AmerisourceBergen Corporation (Holding Co) has a beta of 0.93, suggesting that its stock price is 7% less volatile than the S&P 500. Comparatively, McKesson Corporation has a beta of 1.15, suggesting that its stock price is 15% more volatile than the S&P 500.

Institutional and Insider Ownership

70.5% of AmerisourceBergen Corporation (Holding Co) shares are owned by institutional investors. Comparatively, 89.9% of McKesson Corporation shares are owned by institutional investors. 27.4% of AmerisourceBergen Corporation (Holding Co) shares are owned by company insiders. Comparatively, 1.2% of McKesson Corporation shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock is poised for long-term growth.

Profitability

This table compares AmerisourceBergen Corporation (Holding Co) and McKesson Corporation’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
AmerisourceBergen Corporation (Holding Co) 0.77% 60.21% 3.89%
McKesson Corporation 2.55% 29.99% 4.88%

Dividends

AmerisourceBergen Corporation (Holding Co) pays an annual dividend of $1.46 per share and has a dividend yield of 1.6%. McKesson Corporation pays an annual dividend of $1.12 per share and has a dividend yield of 0.7%. AmerisourceBergen Corporation (Holding Co) pays out 28.2% of its earnings in the form of a dividend. McKesson Corporation pays out 4.8% 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. AmerisourceBergen Corporation (Holding Co) has increased its dividend for 4 consecutive years and McKesson Corporation has increased its dividend for 12 consecutive years.

Earnings and Valuation

This table compares AmerisourceBergen Corporation (Holding Co) and McKesson Corporation’s top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
AmerisourceBergen Corporation (Holding Co) $149.76 billion 0.13 $2.34 billion $5.17 17.90
McKesson Corporation $198.53 billion 0.17 $4.35 billion $23.34 6.85

McKesson Corporation has higher revenue and earnings than AmerisourceBergen Corporation (Holding Co). McKesson Corporation is trading at a lower price-to-earnings ratio than AmerisourceBergen Corporation (Holding Co), indicating that it is currently the more affordable of the two stocks.

Analyst Ratings

This is a summary of recent recommendations and price targets for AmerisourceBergen Corporation (Holding Co) and McKesson Corporation, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
AmerisourceBergen Corporation (Holding Co) 0 6 7 0 2.54
McKesson Corporation 1 10 7 0 2.33

AmerisourceBergen Corporation (Holding Co) currently has a consensus target price of $94.46, suggesting a potential upside of 2.08%. McKesson Corporation has a consensus target price of $170.20, suggesting a potential upside of 6.49%. Given McKesson Corporation’s higher possible upside, analysts clearly believe McKesson Corporation is more favorable than AmerisourceBergen Corporation (Holding Co).

Summary

McKesson Corporation beats AmerisourceBergen Corporation (Holding Co) on 11 of the 16 factors compared between the two stocks.

About AmerisourceBergen Corporation (Holding Co)

AmerisourceBergen Corporation is a pharmaceutical sourcing and distribution services company. The Company’s segments include Pharmaceutical Distribution and Other. The Company provides services to healthcare providers, and pharmaceutical and biotech manufacturers. As of June 30, 2016, the Pharmaceutical Distribution segment consists of two operating segments, including the operations of AmerisourceBergen Drug Corporation (ABDC) and AmerisourceBergen Specialty Group (ABSG), which distributes specialty drugs to their customers. Servicing healthcare providers in the pharmaceutical supply channel, the Pharmaceutical Distribution segment’s operations provide drug distribution and related services. The Other segment consists of the operations of various segments, including the AmerisourceBergen Consulting Services (ABCS), the World Courier Group, Inc. and the MWI Veterinary Supply, Inc. ABSG operates distribution facilities that focus primarily on complex disease treatment regimens.

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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