CAH

Cardinal Health is a thin-margin drug distributor doing the heavy lifting of moving ~$223B of product for a 3.7% gross and 1.0% operating margin — economics that are structural to the wholesale-pharma model, not a temporary problem. On that base the FY2025 results are genuinely good: net income jumped +83% to $1.56B, diluted EPS rose +87% to $6.45, and operating income climbed +83% to $2.27B even as revenue slipped -1.9%. That is a real margin/mix improvement, and the five-year history shows the turn — from a -$938M loss in FY2022 to $1.56B today. Management is returning that cash, with $765M of buybacks and $494M of dividends in FY2025 and $2.7B still authorized under the program that runs to December 2027 (10-K, Issuer Purchases of Equity Securities), which steadily shrinks the share count (-2.1%).

The problem is price. At $221.77 the stock trades at 34.4x FY EPS — a rich multiple for a business that nets less than a penny on each revenue dollar and whose earnings are volatile (net income has swung from a loss to $1.56B over four years). The 10-K's own buyback table shows the company repurchasing shares at $133–158 as recently as April–June 2025; the stock has since re-rated roughly 40–50% higher, so much of the earnings recovery is already in the price. Meanwhile operating cash flow fell -36% to $2.40B and cash on hand dropped -24.5% to $3.87B, so the cash engine is cooling even as the multiple expands. Negative stockholders' equity of -$2.78B makes the -56% ROE figure uninformative — it is an artifact of years of buybacks and the negative-working-capital distributor model (current assets $36.4B vs. current liabilities $38.9B), not operating insolvency — but it does mean there is no equity cushion if results wobble.