This Company Crushed Google Stock With Just 1% Profits – How?
In the last five years, McKesson stock (NYSE: MCK), a healthcare supply chain management company, surged 4x, leaving the likes of Google (NASDAQ: GOOG) in the dust. This year alone, it’s up 14%, while Google is down 12%. How is that? McKesson’s stock has grown 284% since 2020, primarily due to:
- a 97% rise in its trailing adjusted P/E ratio from 11x in 2020 to 22x currently;
- a 49% growth in revenues from $231 billion to $345 billion over the same period; and
- a 28% fall in total shares to 130 million; partly offset by
- a 6% fall in net income margin to from 1.2% to 1.1% now
Meanwhile, Google stock has risen 92%, driven by a 174% earnings increase from $2.93 per share in 2020 to $8.04 per share in 2024, though this growth was partially offset by a 30% reduction in its trailing P/E ratio from 30x to 21x over the same timeframe.
We’ll delve into the specifics of these factors. While MCK stock has outperformed GOOG, if you want an upside with a smoother ride than an individual stock, consider the High-Quality portfolio, which has outperformed the S&P, and clocked >91% returns since inception.
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McKesson’s Earnings Transformation: Strategic Growth Drivers and Operational Efficiency
McKesson’s earnings have doubled, driven by substantial growth in both sales and operating income. The company’s revenue increased nearly 50%, from $231 billion in 2020 to $345 billion currently, due to several strategic factors.
A significant contributor was McKesson’s integral role in COVID-19 response efforts, where the company served as the U.S. government’s centralized distributor for vaccines, tests, and medical supplies. This position considerably enhanced revenue during the pandemic period. Additionally, McKesson has strategically expanded its pharmaceutical distribution business while capitalizing on growing demand for specialty pharmaceuticals, particularly in oncology and other complex therapeutic areas that typically generate higher margins. Lately, the growth in pharmaceuticals distribution business has stemmed from increased prescription volumes, specifically within specialty products, retail national accounts, and GLP-1 medications.
The company has further strengthened its market position through targeted acquisitions, including Rx Savings Solutions, OncoHealth, and a controlling interest in Florida Cancer Specialists & Research Institutes. These acquisitions have expanded McKesson’s capabilities in oncology and biopharma services. Furthermore, McKesson’s medical-surgical distribution business has experienced robust growth, driven by sustained demand for medical supplies that began during the pandemic and has continued thereafter.
Not only did McKesson see its sales rise, its net income has risen 40% from $2.7 billion in 2020 to $3.8 billion now. The company’s net margin though contracted by a modest 10 bps to 1.1% over this period. Given that McKesson primarily acts as an intermediary between manufacturers and healthcare providers, this type of business typically operates on thin margins with high volume.
Further contributing to the earnings growth is a large 28% fall in total shares outstanding, as the company spent $13 billion on share repurchases in the last five years.
McKesson’s Valuation Surge and Market Resilience
McKesson has experienced a doubling of its trailing price-to-earnings ratio from 11x to 22x since 2020, driven by several key factors. Investors have responded positively to the company’s strategic shift toward higher-margin businesses, particularly specialty pharmaceuticals, oncology services, and technology solutions—a transformation that suggests stronger profit sustainability beyond conventional distribution operations. This strategic evolution, combined with impressive revenue and earnings growth, substantiates the significant expansion in its valuation multiple.
The company’s remarkable performance extends beyond mere valuation metrics. In 2022, when Google declined by over 30%, McKesson achieved gains exceeding 50%. This exceptional performance stems from the company’s position as a critical element of healthcare infrastructure, enhancing its appeal to investors seeking defensive investments during economic volatility. McKesson’s consistent cash generation provides valuable stability in uncertain market conditions.
Investors particularly recognized McKesson’s essential role during the pandemic, highlighting its importance to public health systems and contributing to its stock price appreciation in 2022. This resilience has been demonstrated repeatedly during recent economic downturns. MCK stock’s peak-to-trough decline of just 11.0% in 2022 significantly outperformed the S&P 500’s 25.4% drop. Similarly, during the 2020 market turbulence, McKesson stock fell 32.3% from its highs, marginally better than the S&P 500’s 33.9% decline, further illustrating its relative stability during market stress.
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| Returns | Mar 2025 MTD [1] |
2025 YTD [1] |
2017-25 Total [2] |
| GOOG Return | -3% | -12% | 336% |
| MCK Return | 2% | 14% | 395% |
| S&P 500 Return | -5% | -4% | 152% |
| Trefis Reinforced Value Portfolio | -6% | -8% | 508% |
[1] Returns as of 3/17/2025
[2] Cumulative total returns since the end of 2016
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