Dear WallStreetZen Member,
This week, our Smart Leverage Alert centers on Cardinal Health (CAH).
This company represents one of the backbones of American healthcare by moving medications and supplies to hospitals and pharmacies nationwide. It’s been quietly delivering some of its strongest results in years … Yet the market still hasn't given it credit.
In the last quarter, Cardinal Health grew adjusted EPS 35% year over year to $3.17, beating Wall Street's $2.79 estimate, and raised full-year guidance again. But a single non-cash accounting charge dragged the headline number lower, and investors have stayed fixated on that instead of the business underneath it.
Within that disconnect lies the potential opportunity. The market treats CAH like a sleepy distributor, yet revenue topped $60 billion in the quarter, up 11%, and management now guides to full-year adjusted EPS growth of roughly 30%.
Our Zen Ratings model confirms the strength. CAH earns an A rating, which amounts to a Strong Buy recommendation, landing in the top 4% of more than 4,600 stocks. It's the #1-ranked stock in the A-rated Medical Distribution industry.
Looking at the Component Grades that shape the overall grade, CAH ranks in the top 12% for Growth, the top 11% for Safety, and the top 3% for Sentiment . That mix points to a durable, defensively positioned business Wall Street is warming to — quality the market underrates until the numbers force the issue.
Our Logic
With Zen Options Essentials, we use "Smart Leverage" — Deep-In-The-Money options that let you control shares for a fraction of the cost, with your maximum risk strictly defined from day one.
The "Smart Leverage" Setup: (Ticker Name) Long Call
Given the strong fundamental case and the disconnect between CAH's earnings power and its valuation, here's how we're structuring the trade using Smart Leverage — Deep-In-The-Money calls that move nearly dollar-for-dollar with the stock, but with strictly defined risk from day one.
Instead of committing around $23,000 to own 100 shares outright, a Deep-In-The-Money Call lets you control those same shares for a little over $4,000.
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