Rob,
I am new to this thread, and any discussions of this stock. I like to look at stocks where investors overreact to bad news. At first blush, McKesson would seem to fit the bill, so to speak.
After today's debacle, I analyzed the old, uncorrected numbers and determined MCK to be somewhere around a P/E of 17 when priced at about $34 per share. This was a very attractive number to me, given that the revenues in question would be rebooked in future quarters depending upon GAAP procedural corrections.
Next I looked (with a skeptical eye) at the old projected earnings and revenues growth rates. I believe that the original numbers you offered of 18% to 21% may be a tad on the high side, though I did find plenty of analyst support in your range. I am always conservative regarding analysts' estimates, so I used 17% (revenues) and 15% (earnings) in my calculations, based on the "old" numbers. I would reduce that to about 12% (revenues) and 10% (earnings) for the "new" numbers, again quite conservative. I would much rather be surprised by an earnings announcement that exceeds my expectations than be disappointed by one that doesn't. Just my personal philosophy.
Even so, my reduced growth numbers would be respectable in a healthy company, and there's the rub. MCK isn't healthy currently, and is likely many quarters away yet from resolving this mess. There was a terrible sell-off today, but I'm not sure if it came primarily from the institutional investor or the individual investor. I strongly suspect it was both segments, but the large volume might make a better case for the institutionals. If so, the small investor is wise to remember that the institutionals don't easily forgive and forget.
exchange2000.com
exchange2000.com
The final piece of evidence came this afternoon via a CNBC breaking news story that announced several lawsuits that are being filed over this incident. The comparisons to Cendant will be unavoidable. And the lawsuits will provide lots of negative press for MCK over the next few quarters. I already found several news sites that have stories regarding different law firms that are filing suit. Current shareholders may want to read these articles to see if their individual concerns are being addressed by one or more of these firms, and if so, whether or not it is in their best interests to sign on with one of the firms as a co-plaintiff. I'm not making a recommendation one way or the other. Merely acknowledging that the suits exist.
go2net.newsalert.com
The bottom line to me, is that if you are willing to wait and hold, you might be rewarded several quarters out with a substantial share price appreciation approaching 52 week highs, but that could be a long wait that's heavily fraught with downside risks. The US stock markets are still very bullish, and instead of buying MCK shares at a depressed price, your free investing capital might be better utilized elsewhere for the short term. For those of you holding MCK at a current unrealized loss, you will have to determine (to sell or to hold) for yourselves if the potential future rewards outweigh any risks (known or unknown) and each of you may correctly decide differently depending upon your individual investment styles. Again, I'm not recommending one way or the other.
I will be keeping an eye on MCK to determine positive progress by the company, but for now will pass on this investment opportunity. Good luck to the current shareholders and the regular members of this thread.
KJC |
