Index removal sets the stage for Cardinal Health stock review

Cardinal Health (CAH) has been removed from the Russell 1000 Growth-Defensive, Value-Defensive, and Defensive indices, a reclassification that can prompt portfolio changes for index-tracking funds and influence trading volumes.

This kind of index reshuffle often leads investors to reassess a stock’s role in their portfolios, with attention shifting to Cardinal Health’s business mix, recent share performance, and how it compares with other large healthcare distributors.

The index removals come after a period of strong share price momentum for Cardinal Health, with a 30-day share price return of 18.44% and a 1-year total shareholder return of 46.38%. Over 5 years, the total shareholder return is approximately 4.7x.

If this kind of move has you thinking about where else capital could work hard, it may be a good moment to scan for other healthcare distributors and related opportunities using our 40 healthcare AI stocks.

Cardinal Health now trades close to analyst targets after a strong 1-year total return of 46.38% and a very large 5-year gain of about 4.7x. Is there still upside here, or is the market already pricing in future growth?

Most Popular Narrative: 2.6% Undervalued

Cardinal Health’s most followed valuation narrative points to a fair value of $245.27 versus a last close of $238.94, a small gap that still rests on detailed long term assumptions about growth, margins and capital returns.

The company's investments in automation, advanced supply chain technology, and new distribution centers are expected to deliver long-term operational efficiencies and cost savings, supporting improved net margins and free cash flow as healthcare shifts to value-based and outpatient models.

Want to see what is baked into that $245.27 figure? The narrative leans on steady revenue expansion, slightly higher profitability, and a future earnings multiple that assumes investors stay willing to pay up.

Result: Fair Value of $245.27 (UNDERVALUED)

However, Cardinal Health still faces pressure from tighter regulation and pricing scrutiny, as well as the risk that major customer contract changes could affect margins and revenue.

Another View: Cardinal Health through the P/E lens

The SWS fair value narrative points to Cardinal Health stock being modestly undervalued, but the P/E picture is less forgiving. At 36x earnings, Cardinal Health trades above the US Healthcare industry at 25.9x, peers at 27.3x, and a fair ratio of 29.1x, which suggests valuation risk if sentiment cools.

For investors weighing these mixed signals, the P/E gap raises a simple question: is the current price reflecting future expectations that may already be quite demanding for Cardinal Health?

Next Steps

Given the mix of optimism and caution around Cardinal Health, this is a good moment to review the full picture yourself and move promptly to shape your own stance using the 2 key rewards and 2 important warning signs.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.