Intrinsic value of McKesson - MCK

Previous Close

$129.38

  Intrinsic Value

$355.02

stock screener

  Rating & Target

str. buy

+174%

Previous close

$129.38

 
Intrinsic value

$355.02

 
Up/down potential

+174%

 
Rating

str. buy

We calculate the intrinsic value of MCK stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Shares outstanding, mln

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2017(a)
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046
   2047

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  4.01
  4.00
  4.10
  4.19
  4.27
  4.34
  4.41
  4.47
  4.52
  4.57
  4.61
  4.65
  4.69
  4.72
  4.75
  4.77
  4.79
  4.81
  4.83
  4.85
  4.86
  4.88
  4.89
  4.90
  4.91
  4.92
  4.93
  4.94
  4.94
  4.95
  4.95
Revenue, $m
  198,533
  206,474
  214,940
  223,946
  233,510
  243,654
  254,398
  265,766
  277,783
  290,476
  303,875
  318,009
  332,911
  348,617
  365,161
  382,584
  400,926
  420,229
  440,540
  461,905
  484,377
  508,007
  532,851
  558,969
  586,422
  615,275
  645,597
  677,460
  710,939
  746,114
  783,068
Variable operating expenses, $m
 
  202,494
  210,738
  219,508
  228,823
  238,701
  249,163
  260,234
  271,936
  284,297
  297,345
  309,684
  324,196
  339,491
  355,602
  372,569
  390,430
  409,228
  429,007
  449,814
  471,697
  494,708
  518,902
  544,336
  571,071
  599,169
  628,697
  659,726
  692,328
  726,582
  762,569
Fixed operating expenses, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total operating expenses, $m
  191,434
  202,494
  210,738
  219,508
  228,823
  238,701
  249,163
  260,234
  271,936
  284,297
  297,345
  309,684
  324,196
  339,491
  355,602
  372,569
  390,430
  409,228
  429,007
  449,814
  471,697
  494,708
  518,902
  544,336
  571,071
  599,169
  628,697
  659,726
  692,328
  726,582
  762,569
Operating income, $m
  7,099
  3,980
  4,202
  4,437
  4,688
  4,953
  5,235
  5,532
  5,847
  6,179
  6,530
  8,325
  8,715
  9,126
  9,559
  10,015
  10,495
  11,001
  11,533
  12,092
  12,680
  13,299
  13,949
  14,633
  15,351
  16,107
  16,901
  17,735
  18,611
  19,532
  20,499
EBITDA, $m
  8,009
  7,057
  7,346
  7,654
  7,981
  8,328
  8,695
  9,083
  9,494
  9,928
  10,386
  10,869
  11,378
  11,915
  12,481
  13,076
  13,703
  14,363
  15,057
  15,787
  16,555
  17,363
  18,212
  19,105
  20,043
  21,029
  22,065
  23,154
  24,299
  25,501
  26,764
Interest expense (income), $m
  315
  461
  569
  684
  806
  936
  1,074
  1,219
  1,374
  1,537
  1,709
  1,891
  2,082
  2,285
  2,498
  2,722
  2,959
  3,207
  3,469
  3,745
  4,035
  4,339
  4,660
  4,997
  5,351
  5,724
  6,115
  6,527
  6,959
  7,413
  7,890
Earnings before tax, $m
  6,891
  3,519
  3,632
  3,753
  3,881
  4,017
  4,161
  4,313
  4,473
  4,642
  4,821
  6,434
  6,633
  6,842
  7,062
  7,293
  7,537
  7,793
  8,063
  8,347
  8,645
  8,959
  9,289
  9,636
  10,000
  10,383
  10,785
  11,208
  11,652
  12,119
  12,609
Tax expense, $m
  1,614
  950
  981
  1,013
  1,048
  1,085
  1,123
  1,164
  1,208
  1,253
  1,302
  1,737
  1,791
  1,847
  1,907
  1,969
  2,035
  2,104
  2,177
  2,254
  2,334
  2,419
  2,508
  2,602
  2,700
  2,803
  2,912
  3,026
  3,146
  3,272
  3,404
Net income, $m
  5,070
  2,569
  2,652
  2,740
  2,833
  2,933
  3,037
  3,148
  3,265
  3,389
  3,519
  4,697
  4,842
  4,994
  5,155
  5,324
  5,502
  5,689
  5,886
  6,093
  6,311
  6,540
  6,781
  7,034
  7,300
  7,580
  7,873
  8,182
  8,506
  8,847
  9,205

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  2,783
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  60,969
  63,413
  66,013
  68,779
  71,717
  74,832
  78,132
  81,623
  85,314
  89,213
  93,328
  97,669
  102,246
  107,069
  112,150
  117,501
  123,134
  129,063
  135,301
  141,863
  148,764
  156,022
  163,652
  171,674
  180,105
  188,967
  198,279
  208,065
  218,347
  229,151
  240,500
Adjusted assets (=assets-cash), $m
  58,186
  63,413
  66,013
  68,779
  71,717
  74,832
  78,132
  81,623
  85,314
  89,213
  93,328
  97,669
  102,246
  107,069
  112,150
  117,501
  123,134
  129,063
  135,301
  141,863
  148,764
  156,022
  163,652
  171,674
  180,105
  188,967
  198,279
  208,065
  218,347
  229,151
  240,500
Revenue / Adjusted assets
  3.412
  3.256
  3.256
  3.256
  3.256
  3.256
  3.256
  3.256
  3.256
  3.256
  3.256
  3.256
  3.256
  3.256
  3.256
  3.256
  3.256
  3.256
  3.256
  3.256
  3.256
  3.256
  3.256
  3.256
  3.256
  3.256
  3.256
  3.256
  3.256
  3.256
  3.256
Average production assets, $m
  5,628
  16,518
  17,195
  17,916
  18,681
  19,492
  20,352
  21,261
  22,223
  23,238
  24,310
  25,441
  26,633
  27,889
  29,213
  30,607
  32,074
  33,618
  35,243
  36,952
  38,750
  40,641
  42,628
  44,718
  46,914
  49,222
  51,648
  54,197
  56,875
  59,689
  62,645
Working capital, $m
  1,336
  -16,311
  -16,980
  -17,692
  -18,447
  -19,249
  -20,097
  -20,995
  -21,945
  -22,948
  -24,006
  -25,123
  -26,300
  -27,541
  -28,848
  -30,224
  -31,673
  -33,198
  -34,803
  -36,491
  -38,266
  -40,133
  -42,095
  -44,159
  -46,327
  -48,607
  -51,002
  -53,519
  -56,164
  -58,943
  -61,862
Total debt, $m
  8,545
  10,543
  12,670
  14,933
  17,335
  19,884
  22,583
  25,439
  28,458
  31,647
  35,013
  38,564
  42,308
  46,253
  50,410
  54,787
  59,395
  64,245
  69,347
  74,715
  80,360
  86,297
  92,538
  99,100
  105,997
  113,246
  120,863
  128,868
  137,279
  146,116
  155,400
Total liabilities, $m
  49,874
  51,872
  53,999
  56,262
  58,664
  61,213
  63,912
  66,768
  69,787
  72,976
  76,342
  79,893
  83,637
  87,582
  91,739
  96,116
  100,724
  105,574
  110,676
  116,044
  121,689
  127,626
  133,867
  140,429
  147,326
  154,575
  162,192
  170,197
  178,608
  187,445
  196,729
Total equity, $m
  11,095
  11,541
  12,014
  12,518
  13,052
  13,619
  14,220
  14,855
  15,527
  16,237
  16,986
  17,776
  18,609
  19,487
  20,411
  21,385
  22,410
  23,489
  24,625
  25,819
  27,075
  28,396
  29,785
  31,245
  32,779
  34,392
  36,087
  37,868
  39,739
  41,705
  43,771
Total liabilities and equity, $m
  60,969
  63,413
  66,013
  68,780
  71,716
  74,832
  78,132
  81,623
  85,314
  89,213
  93,328
  97,669
  102,246
  107,069
  112,150
  117,501
  123,134
  129,063
  135,301
  141,863
  148,764
  156,022
  163,652
  171,674
  180,105
  188,967
  198,279
  208,065
  218,347
  229,150
  240,500
Debt-to-equity ratio
  0.770
  0.910
  1.050
  1.190
  1.330
  1.460
  1.590
  1.710
  1.830
  1.950
  2.060
  2.170
  2.270
  2.370
  2.470
  2.560
  2.650
  2.740
  2.820
  2.890
  2.970
  3.040
  3.110
  3.170
  3.230
  3.290
  3.350
  3.400
  3.450
  3.500
  3.550
Adjusted equity ratio
  0.146
  0.182
  0.182
  0.182
  0.182
  0.182
  0.182
  0.182
  0.182
  0.182
  0.182
  0.182
  0.182
  0.182
  0.182
  0.182
  0.182
  0.182
  0.182
  0.182
  0.182
  0.182
  0.182
  0.182
  0.182
  0.182
  0.182
  0.182
  0.182
  0.182
  0.182

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  5,070
  2,569
  2,652
  2,740
  2,833
  2,933
  3,037
  3,148
  3,265
  3,389
  3,519
  4,697
  4,842
  4,994
  5,155
  5,324
  5,502
  5,689
  5,886
  6,093
  6,311
  6,540
  6,781
  7,034
  7,300
  7,580
  7,873
  8,182
  8,506
  8,847
  9,205
Depreciation, amort., depletion, $m
  910
  3,077
  3,145
  3,217
  3,293
  3,374
  3,460
  3,551
  3,647
  3,749
  3,856
  2,544
  2,663
  2,789
  2,921
  3,061
  3,207
  3,362
  3,524
  3,695
  3,875
  4,064
  4,263
  4,472
  4,691
  4,922
  5,165
  5,420
  5,688
  5,969
  6,265
Funds from operations, $m
  6,066
  5,645
  5,796
  5,957
  6,127
  6,307
  6,498
  6,699
  6,913
  7,138
  7,375
  7,241
  7,505
  7,783
  8,076
  8,385
  8,709
  9,051
  9,411
  9,789
  10,186
  10,604
  11,044
  11,506
  11,991
  12,502
  13,038
  13,602
  14,194
  14,816
  15,469
Change in working capital, $m
  1,322
  -627
  -669
  -711
  -756
  -801
  -849
  -898
  -949
  -1,003
  -1,058
  -1,117
  -1,177
  -1,241
  -1,307
  -1,376
  -1,449
  -1,525
  -1,605
  -1,688
  -1,775
  -1,867
  -1,963
  -2,063
  -2,169
  -2,279
  -2,395
  -2,517
  -2,645
  -2,779
  -2,919
Cash from operations, $m
  4,744
  6,273
  6,465
  6,668
  6,882
  7,108
  7,346
  7,598
  7,862
  8,141
  8,434
  8,358
  8,682
  9,024
  9,383
  9,761
  10,158
  10,576
  11,015
  11,477
  11,961
  12,471
  13,007
  13,569
  14,160
  14,781
  15,433
  16,119
  16,838
  17,594
  18,389
Maintenance CAPEX, $m
  0
  -1,581
  -1,652
  -1,720
  -1,792
  -1,868
  -1,949
  -2,035
  -2,126
  -2,222
  -2,324
  -2,431
  -2,544
  -2,663
  -2,789
  -2,921
  -3,061
  -3,207
  -3,362
  -3,524
  -3,695
  -3,875
  -4,064
  -4,263
  -4,472
  -4,691
  -4,922
  -5,165
  -5,420
  -5,688
  -5,969
New CAPEX, $m
  -562
  -704
  -677
  -720
  -765
  -811
  -860
  -909
  -961
  -1,015
  -1,072
  -1,131
  -1,192
  -1,256
  -1,324
  -1,394
  -1,467
  -1,544
  -1,625
  -1,709
  -1,798
  -1,890
  -1,988
  -2,089
  -2,196
  -2,308
  -2,426
  -2,549
  -2,678
  -2,814
  -2,956
Cash from investing activities, $m
  -3,796
  -2,285
  -2,329
  -2,440
  -2,557
  -2,679
  -2,809
  -2,944
  -3,087
  -3,237
  -3,396
  -3,562
  -3,736
  -3,919
  -4,113
  -4,315
  -4,528
  -4,751
  -4,987
  -5,233
  -5,493
  -5,765
  -6,052
  -6,352
  -6,668
  -6,999
  -7,348
  -7,714
  -8,098
  -8,502
  -8,925
Free cash flow, $m
  948
  3,987
  4,136
  4,228
  4,325
  4,429
  4,538
  4,653
  4,775
  4,903
  5,038
  4,796
  4,946
  5,104
  5,271
  5,446
  5,630
  5,824
  6,028
  6,243
  6,469
  6,706
  6,955
  7,217
  7,492
  7,782
  8,086
  8,405
  8,740
  9,093
  9,463
Issuance/(repayment) of debt, $m
  393
  1,998
  2,127
  2,263
  2,403
  2,548
  2,699
  2,856
  3,019
  3,189
  3,366
  3,551
  3,744
  3,946
  4,157
  4,377
  4,608
  4,850
  5,103
  5,368
  5,645
  5,937
  6,242
  6,562
  6,897
  7,249
  7,618
  8,005
  8,411
  8,837
  9,284
Issuance/(repurchase) of shares, $m
  -2,191
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  -1,816
  1,998
  2,127
  2,263
  2,403
  2,548
  2,699
  2,856
  3,019
  3,189
  3,366
  3,551
  3,744
  3,946
  4,157
  4,377
  4,608
  4,850
  5,103
  5,368
  5,645
  5,937
  6,242
  6,562
  6,897
  7,249
  7,618
  8,005
  8,411
  8,837
  9,284
Total cash flow (excl. dividends), $m
  -1,012
  5,986
  6,263
  6,491
  6,728
  6,977
  7,237
  7,509
  7,794
  8,092
  8,404
  8,347
  8,690
  9,050
  9,427
  9,823
  10,238
  10,674
  11,131
  11,611
  12,114
  12,642
  13,197
  13,778
  14,389
  15,030
  15,703
  16,410
  17,151
  17,930
  18,747
Retained Cash Flow (-), $m
  -2,171
  -446
  -473
  -503
  -535
  -567
  -601
  -635
  -672
  -710
  -749
  -790
  -833
  -878
  -925
  -974
  -1,025
  -1,079
  -1,135
  -1,194
  -1,256
  -1,321
  -1,389
  -1,460
  -1,535
  -1,613
  -1,695
  -1,781
  -1,871
  -1,966
  -2,066
Prev. year cash balance distribution, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  199
  206
  215
  224
  234
  244
  254
  266
  278
  290
  304
  318
  333
  349
  365
  383
  401
  420
  441
  462
  484
  508
  533
  559
  586
  615
  646
  677
  711
  746
Cash available for distribution, $m
 
  5,539
  5,790
  5,987
  6,194
  6,410
  6,636
  6,873
  7,122
  7,382
  7,655
  7,557
  7,857
  8,172
  8,502
  8,849
  9,213
  9,595
  9,996
  10,416
  10,858
  11,321
  11,808
  12,319
  12,855
  13,417
  14,008
  14,629
  15,280
  15,964
  16,682
Discount rate, %
 
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
 
  5,311
  5,300
  5,210
  5,100
  4,969
  4,816
  4,644
  4,451
  4,241
  4,013
  3,589
  3,353
  3,107
  2,854
  2,598
  2,341
  2,088
  1,841
  1,604
  1,380
  1,171
  980
  807
  655
  522
  409
  314
  236
  174
  126
Current shareholders' claim on cash, %
  100
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

McKesson Corporation is a healthcare supply chain management solutions, retail pharmacy, community oncology and specialty care, and healthcare information technology company. The Company provides medicines, medical products and healthcare services by partnering with pharmaceutical manufacturers, providers, pharmacies, governments and other organizations in healthcare. It operates through two segments: McKesson Distribution Solutions and McKesson Technology Solutions. The distribution solutions segment distributes branded and generic pharmaceutical drugs and other healthcare-related products internationally and provides practice management, technology, clinical support and business solutions to community-based oncology and other specialty practices. Technology Solutions segment provides software and analytics, network solutions and technology-enabled services.

FINANCIAL RATIOS  of  McKesson (MCK)

Valuation Ratios
P/E Ratio 5.4
Price to Sales 0.1
Price to Book 2.5
Price to Tangible Book
Price to Cash Flow 5.8
Price to Free Cash Flow 6.5
Growth Rates
Sales Growth Rate 4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -17%
Cap. Spend. - 3 Yr. Gr. Rate 6.3%
Financial Strength
Quick Ratio 2
Current Ratio 0
LT Debt to Equity 65.8%
Total Debt to Equity 77%
Interest Coverage 23
Management Effectiveness
Return On Assets 9%
Ret/ On Assets - 3 Yr. Avg. 5.6%
Return On Total Capital 27.6%
Ret/ On T. Cap. - 3 Yr. Avg. 16.2%
Return On Equity 50.7%
Return On Equity - 3 Yr. Avg. 31.7%
Asset Turnover 3.4
Profitability Ratios
Gross Margin 5.7%
Gross Margin - 3 Yr. Avg. 6%
EBITDA Margin 4.1%
EBITDA Margin - 3 Yr. Avg. 2.9%
Operating Margin 3.6%
Oper. Margin - 3 Yr. Avg. 2.4%
Pre-Tax Margin 3.5%
Pre-Tax Margin - 3 Yr. Avg. 2.2%
Net Profit Margin 2.6%
Net Profit Margin - 3 Yr. Avg. 1.5%
Effective Tax Rate 23.4%
Eff/ Tax Rate - 3 Yr. Avg. 27.3%
Payout Ratio 5%

MCK stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the MCK stock intrinsic value calculation we used $198533 million for the last fiscal year's total revenue generated by McKesson. The default revenue input number comes from 2017 income statement of McKesson. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our MCK stock valuation model: a) initial revenue growth rate of 4% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 4.3%, whose default value for MCK is calculated based on our internal credit rating of McKesson, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of McKesson.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of MCK stock the variable cost ratio is equal to 98.1%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for MCK stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 5.4% for McKesson.

Corporate tax rate of 27% is the nominal tax rate for McKesson. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the MCK stock is equal to 0.1%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for MCK are equal to 8%.

Life of production assets of 10 years is the average useful life of capital assets used in McKesson operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for MCK is equal to -7.9%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $11095 million for McKesson - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 221 million for McKesson is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of McKesson at the current share price and the inputted number of shares is $28.6 billion.

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COMPANY NEWS

▶ McKesson: Fiscal 1Q Earnings Snapshot   [07:21AM  Associated Press]
▶ San Francisco to consider tax on companies to help homeless   [Jul-16-18 09:46PM  Associated Press]
▶ 10 things to know about the proposed CoverMyMeds HQ in Franklinton   [01:38PM  American City Business Journals]
▶ Drug company's lawsuit could derail Nevada execution   [Jul-10-18 08:31PM  Associated Press]
▶ 4 Big Pharma Stocks Amazon Could Disrupt Next   [Jun-29-18 09:33AM  InvestorPlace]
▶ Uber poaches new real estate head from McKesson   [09:18AM  American City Business Journals]
▶ Hockey and basketball lead the blitz   [01:22PM  CNBC Videos]
▶ Pharmaceutical distributor to lay off 126 workers   [Jun-04-18 10:39AM  American City Business Journals]
▶ [$$] Deal Close Announcements: May 28-June 1   [Jun-01-18 07:01PM  The Wall Street Journal]
▶ Company News For May 25, 2018   [10:03AM  Zacks]
▶ McKesson: Fiscal 4Q Earnings Snapshot   [07:24AM  Associated Press]
▶ [$$] Opioid Shipments to Small Towns Come Under Spotlight at Hearing   [May-09-18 12:15AM  The Wall Street Journal]
▶ [$$] McKesson Launches Comprehensive Review of Operations   [08:22AM  The Wall Street Journal]
▶ McKesson, Greenbriar, Aptiv & Alphabet   [01:17PM  CNBC Videos]
▶ Exclusive: WeWork's massive growth fuels talks for two major S.F. leases   [Apr-05-18 04:54PM  American City Business Journals]
▶ Best Undervalued Stock in March   [Mar-23-18 10:02AM  Simply Wall St.]
Financial statements of MCK
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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