Value
5.3/10data confidence 100%| Component | Sub-score |
|---|---|
| P/E | 3.5 |
| P/S | 10.0 |
| EV/EBITDA | 2.8 |
| Fwd P/E | 6.5 |
| PEG | 5.1 |
| Analyst target | 4.0 |
- ▸Forward P/E: 19.9x
- ▸PEG: 1.47
CAH · Why this verdict
Why Cardinal Health (CAH) is rated SELL
Updated
Model-generated analysis — not investment advice. Not a registered investment advisor. Past performance does not guarantee future results.
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VerdictSELL
Overall score4.9/10
ConfidenceMEDIUM
MacroNEUTRAL
Thesis pillars
| Pillar | Expectation | Trend |
|---|---|---|
Dependence on a single source for a critical input creates material supply chain fragility; any disruption to that relationship — whether from pricing, capacity, or operational failure — would directly impair the company's ability to serve its customers with limited short-term recourse. Bear case | The company discloses progress toward a secondary qualified supplier relationship within 18 months, reducing sole-supplier dependency. | →Stable |
| CounterSole-supplier arrangements in distribution often reflect deeply integrated, mutually beneficial partnerships where both parties carry significant switching costs — the exclusivity may represent a stable preferential arrangement rather than a precarious single-point-of-failure. | ||
The company has exceeded analyst estimates in each of the four most recent quarters with an average upside surprise of approximately 11%, including a 17.6% beat three quarters ago, demonstrating sustained execution materially above consensus expectations. Earnings | The beat streak extends to at least 6 consecutive quarters, with EPS surprises remaining above 5% on average. | →Stable |
| CounterThe most recent quarter's 13.7% beat was the highest in the streak, but analyst models are likely to reset upward in response to repeated outperformance, narrowing the opportunity for future surprises; the earliest beat in the streak at just 2.36% suggests episodes of mean reversion are possible. | ||
Free cash flow is converting at approximately 312% of reported net income, meaning cash generated substantially exceeds what appears on the income statement — a level suggesting reported earnings are materially understating the true economic cash earning power of the business. Quality breakdown | Free cash flow conversion remains above 200% of net income for 2 consecutive reporting periods, confirming the structural cash generation advantage persists. | →Stable |
| CounterFree cash flow materially exceeding net income at this magnitude often reflects specific accounting items — such as large non-cash charges or favorable working capital dynamics — that may not be permanent; normalization of these factors would close the gap between reported earnings and cash, reducing the apparent quality signal. | ||
The stock has moved above its near-term resistance target with momentum indicators showing overbought readings at an RSI of 83, and the risk/reward geometry is clearly unfavorable — there is now more technical downside than upside from current levels. Price targets | RSI falls below 65 and the share price pulls back to or below the $222 resistance target within 2 months, restoring a more balanced setup. | →Stable |
| CounterRSI above 80 can persist in strong sustained uptrends, particularly for companies with consistently improving earnings; volume accumulation and above-average moving average positioning alongside four consecutive beats may sustain overbought readings longer than historical norms suggest. | ||
Dependence on a single source for a critical input creates material supply chain fragility; any disruption to that relationship — whether from pricing, capacity, or operational failure — would directly impair the company's ability to serve its customers with limited short-term recourse.
→StableBear case
- Expectation
- The company discloses progress toward a secondary qualified supplier relationship within 18 months, reducing sole-supplier dependency.
CounterSole-supplier arrangements in distribution often reflect deeply integrated, mutually beneficial partnerships where both parties carry significant switching costs — the exclusivity may represent a stable preferential arrangement rather than a precarious single-point-of-failure.
The company has exceeded analyst estimates in each of the four most recent quarters with an average upside surprise of approximately 11%, including a 17.6% beat three quarters ago, demonstrating sustained execution materially above consensus expectations.
→StableEarnings
- Expectation
- The beat streak extends to at least 6 consecutive quarters, with EPS surprises remaining above 5% on average.
CounterThe most recent quarter's 13.7% beat was the highest in the streak, but analyst models are likely to reset upward in response to repeated outperformance, narrowing the opportunity for future surprises; the earliest beat in the streak at just 2.36% suggests episodes of mean reversion are possible.
Free cash flow is converting at approximately 312% of reported net income, meaning cash generated substantially exceeds what appears on the income statement — a level suggesting reported earnings are materially understating the true economic cash earning power of the business.
→StableQuality breakdown
- Expectation
- Free cash flow conversion remains above 200% of net income for 2 consecutive reporting periods, confirming the structural cash generation advantage persists.
CounterFree cash flow materially exceeding net income at this magnitude often reflects specific accounting items — such as large non-cash charges or favorable working capital dynamics — that may not be permanent; normalization of these factors would close the gap between reported earnings and cash, reducing the apparent quality signal.
The stock has moved above its near-term resistance target with momentum indicators showing overbought readings at an RSI of 83, and the risk/reward geometry is clearly unfavorable — there is now more technical downside than upside from current levels.
→StablePrice targets
- Expectation
- RSI falls below 65 and the share price pulls back to or below the $222 resistance target within 2 months, restoring a more balanced setup.
CounterRSI above 80 can persist in strong sustained uptrends, particularly for companies with consistently improving earnings; volume accumulation and above-average moving average positioning alongside four consecutive beats may sustain overbought readings longer than historical norms suggest.
TrendMatrix Research · core thesis
Engine thesis — one sentence
Four consecutive earnings beats averaging approximately 11% above consensus and free cash flow converting at roughly 3x reported net income demonstrate operational and cash generation strength; however, the stock has moved above its near-term resistance target with an unfavorable risk/reward setup and overbought momentum readings at an RSI of 83, arguing for patience rather than action at current prices.
Falsifiable statement — pillar-level invalidators below. Engine-derived; not personalized advice.
Per-dimension breakdown
Quality
3.5/10data confidence 100%| Component | Sub-score |
|---|---|
| ROA | 2.4 |
| Gross margin | 0.0 |
| Op margin | 0.6 |
| Net margin | 0.3 |
| Current ratio | 3.6 |
| FCF quality | 10.0 |
| Moat | 5.5 |
| Piotroski F | 5.6 |
- ▸Excellent cash conversion: 312% FCF/NI
Growth
2.6/10data confidence 67%| Component | Sub-score |
|---|---|
| Rev growth | 5.2 |
| EPS growth | 0.0 |
Momentum
7.1/10data confidence 100%| Component | Sub-score |
|---|---|
| RSI | 4.1 |
| MACD | 10.0 |
| OBV | 10.0 |
| MA position | 9.0 |
| Volume | 2.2 |
- ▸Overbought (RSI 77)
- ▸Volume accumulation (rising OBV)
- ▸Above 200-day MA
Sentiment
6.6/10data confidence 100%| Component | Sub-score |
|---|---|
| LLM sentiment | 5.4 |
| Analyst rating | 8.6 |
| Price target | 5.4 |
Insider
5.0/10data confidence 50%| Component | Sub-score |
|---|---|
| materiality | 5.0 |
| holder change | 5.1 |
- ▸No net insider activity — $0 (0.000% of mkt cap)
Peer rank
4.0/10data confidence 80%| Component | Sub-score |
|---|---|
| value rank | 3.0 |
| quality rank | 0.0 |
| growth rank | 8.0 |
Technical
4.0/10data confidence 100%| Component | Sub-score |
|---|---|
| bollinger | 1.9 |
| support resistance | 0.4 |
| 52w position | 9.8 |
Risk (lower is worse)
7.4/10data confidence 100%| Component | Sub-score |
|---|---|
| short interest | 7.8 |
| days to cover | 6.7 |
| volatility | 6.8 |
| put call | 7.3 |
| implied vol | 6.9 |
| beta | 10.0 |
| news risk | 6.0 |
- ▸Concentration risks: 1 HIGH, 3 MED (10-K Item 1A — sized via position_sizing, validated via buy_confidence)
Catalyst
6.9/10data confidence 100%| Component | Sub-score |
|---|---|
| erm | 5.0 |
| earnings history | 10.0 |
| earnings timing | 5.0 |
| surprise avg | 8.1 |
| dividend safety | 5.2 |
| news activity | 8.0 |
- ▸Perfect beat streak: 4Q
- ▸Dividend: 86.0%
How the verdict was assembled
Engine trigger
Quality below minimum threshold.
Engine technical detail
verdict_path:
L1:HARD_BLOCKPassed (6)
- MOMENTUM:7.1>=5.5
- INSIDER:OK
- NEWS_BOOST:ANALYST:0.60
- EARNINGS_PROXIMITY:46d clear
- SEMI_CYCLE_PEAK:CLEAR
- MATERIALS_CYCLE_PEAK:CLEAR
Failed (1)
- ASYMMETRY:-0.5=NEGATIVE
Warning (1)
- 8K_CSUITE_CHANGE:5.02 (officer departure/appointment)
Reward-to-Risk
-0.51
Upside
-7.6%
Downside
15.0%
Sizing output
AVOID
Setup— — No clear chart pattern; technical signals are mixed
EdgeNo clear edge — No clear edge identified
SuitabilityModerate — Balanced profile
Investment implication
The L1 gate blocked the positive-verdict path: a hard-floor threshold was breached, so dimensional pillars — including Risk (lower is worse) at 7.4 could not lift the engine output above the verdict floor. Failed gate signal: ASYMMETRY:-0.5=NEGATIVE.
The strongest dimensions are Risk (lower is worse) at 7.4, Momentum at 7.1, and Catalyst at 6.9; the weakest are Growth at 2.6, Quality at 3.5, and Technical at 4.0. The V9 engine flagged 1 failed gate with 1 warning, producing an asymmetric reward-to-risk of -0.51 and an engine sizing output of AVOID.
What would invalidate the thesis
Falsifying conditions — when triggered, the corresponding pillar's thesis is invalidated.
- P1Consistent Earnings Beat Streak
Trip ifEPS surprise falls below 0% for 2 consecutive quarters.
- P2Exceptional Free Cash Generation
Trip ifFree cash flow conversion falls below 100% of net income for 2 consecutive reporting periods.
- P3Price Above Resistance Overbought
Trip ifAnalyst consensus price target rises more than 10% above the current price of $226.40, restoring a favorable upside profile.
- P4Sole Supplier Concentration Risk
Trip ifThe company discloses at least 2 qualified suppliers in a public SEC filing, eliminating the sole-supplier classification.