Cencora

Methodology

Cencora's pharmaceutical distribution business operates on thin margins with predictable, stable earnings growth tied to prescription drug volumes. The recurring-revenue model and healthcare demand resilience make earnings-based fair value calculations highly reliable. Fair value works well when accounting for low-single-digit organic growth plus acquisition contributions.

Methodology

Cencora typically trades at PEG ratios between 1.0-1.5x, reflecting steady but unexciting growth in pharmaceutical distribution markets. The company's specialty distribution and services segments command slightly higher multiples than commodity distribution. PEG works effectively given consistent earnings visibility and minimal cyclicality.

Methodology

Cencora pays a modest dividend yielding 1-2%, with PEGY providing somewhat more favorable valuations than PEG alone. Management balances dividends with strategic M&A to expand specialty and international capabilities. The total return framework captures both growth and income, though growth remains the primary value driver.