McKesson Corp (NYSE:MCK): A Growth Stock with Strong Fundamentals and Technical Breakout Potential

McKesson Corp (NYSE:MCK) has been identified as a potential option in a screen focused on growth stocks with promising technical breakout patterns. This method blends fundamental and technical analysis to find companies with improving earnings and revenue growth, good profitability, and stable finances, while also offering clear chart setups. The goal is to find stocks likely to move higher, using both quantitative strength and market timing.

Fundamental Strength: Growth at a Fair Price

McKesson’s fundamental profile fits the criteria for growth investing, as described in our introduction to growth stocks. Key points from its fundamental analysis report include:

• Growth Performance: Revenue increased 16.2% year-over-year, while EPS rose by 20.7%. The company’s 3-year average EPS growth of 17.2% is higher than many competitors in the Health Care Providers & Services sector. Future estimates indicate continued growth, with earnings expected to grow 13.2% annually.
• Fair Valuation: Despite strong growth, McKesson trades at a P/E of 21.5, below the S&P 500 average (27.4) and lower than 65% of industry peers. Its PEG ratio suggests the stock is reasonably priced.
• Financial Stability: A solid Altman-Z score (5.92) and manageable debt (Debt/FCF of 1.08) show stability, though liquidity metrics like the current ratio (0.9) should be watched.
• Profitability: ROIC of 30.4% is well above the industry average, indicating efficient use of capital.

These fundamentals suggest McKesson is not overvalued, making it a growth stock with potential for further gains.

Technical Setup: Holding Near Key Levels

The technical analysis report shows a promising chart pattern:

• Trend Direction: The long-term trend is positive, with the stock trading near 52-week highs along with the broader market. Short-term activity has been steady, staying between $700 and $738 over the past month.
• Key Levels: A resistance zone sits between $711.67 and $735.34, marked by moving averages and past price movements. A move above this range could signal further upward movement.
• Setup Rating (8/10): Lower volatility and tight trading near resistance suggest a possible breakout. Traders may consider entering above $711.67, with support at $709.58 as a stop-loss level.

Why This Pairing Works

The combination of McKesson’s growth fundamentals and technical setup matches the strategy’s key principles:

1. Growth Stocks Lead: Companies with rising earnings and revenue often deliver strong returns, as explained in our growth investing guide.
2. Technical Confirmation: Breakouts from tight ranges often lead to momentum moves, lowering entry risk by confirming buyer interest.

Finding More Opportunities

McKesson is one of several stocks found through this combined approach. For more options meeting similar criteria, check our Strong Growth Stocks with Good Technical Setups screen.

Disclaimer: This analysis is not investment advice. Do your own research or consult a financial advisor before making decisions.