Measuring the Pulse of Three Health Care Stocks
Discover AAII’s A+ Stock Grades on three health care stocks, Cardinal Health, CVS Health and Pediatrix Medical, as the industry grows with tech, outpatient care and specialty pharmacy trends.
This week, we use AAII’s A+ Investor Stock Grades to provide insight into three health care stocks. With outpatient care expansion, rising investment in health care technology and specialty pharmacy growth expected, should you consider the three stocks of Cardinal Health Inc. (CAH), CVS Health Corp. (CVS) and Pediatrix Medical Group Inc. (MD)?
Health Care Stocks Recent News
The health care industry is forecast to experience significant growth over the next few years. According to a report by McKinsey & Co., U.S. health care earnings before interest, taxes, depreciation and amortization (EBITDA) are expected to increase at a 7% compound annual growth rate (CAGR) over the next few years, rising from $676 billion in 2023 to $987 billion by 2028.
The report highlights several health care segments expected to see higher growth. Health care services and technology are projected to generate $100 billion in EBITDA by 2028, up from $67 billion in 2024. Total pharmacy dispensing revenue is expected to grow from $620 billion in 2023 to $800 billion by 2028. In addition, outpatient care is expanding as more surgeries and treatments move from hospitals to lower-cost sites like clinics and ambulatory centers. Home health services are also rising, supported by new tools that make care delivery more efficient. The use of artificial intelligence (AI) and advanced data systems is increasing, especially among insurers and providers looking to cut costs and improve operations.
Cardinal Health, CVS Health and Pediatrix Medical are all active in segments tied to these areas of growth. As the industry continues to shift toward outpatient care and technology-driven services, these companies may be positioned to capture a larger share of future health care spending.
Grading Health Care Stocks With AAII’s A+ Stock Grades
When analyzing a company, it is helpful to have an objective framework that allows you to compare companies in the same way. This is why AAII created the A+ Stock Grades, which evaluate companies across five factors that research and real-world investment results indicate to identify market-beating stocks in the long run: value, growth, momentum, earnings estimate revisions (and surprises) and quality.
Using AAII’s A+ Stock Grades, the following table summarizes the attractiveness of three health care stocks—Cardinal Health, CVS Health and Pediatrix Medical—based on their fundamentals.
AAII’s A+ Stock Grade Summary for Three Health Care Stocks
What the A+ Stock Grades Reveal
Cardinal Health Inc. (CAH) operates as a health care services and products company in the U.S. and internationally. It operates in two segments: pharmaceutical and specialty solutions, and global medical products and distribution. The company provides customized solutions for hospitals, health systems, pharmacies, ambulatory surgery centers, clinical laboratories, physician offices and home care settings. It distributes branded and generic pharmaceuticals, specialty pharmaceuticals, and over-the-counter health care and consumer products. Cardinal Health also provides services to pharmaceutical manufacturers and health care providers for specialty drug support; offers pharmacy management services to hospitals; operates pharmacies, including those in community health centers; and repackages generic and over-the-counter products. It manufactures, sources and distributes Cardinal Health-branded medical, surgical and laboratory products. The company was incorporated in 1979 and is headquartered in Dublin, Ohio.
Cardinal Health has a Momentum Grade of B, based on its Momentum Score of 64. This means that the stock’s momentum has been strong in terms of its weighted relative price strength over the last four quarters. The weighted four-quarter relative strength rank is the relative price change for each of the past four quarters, with the most recent quarterly price change given a weight of 40% and each of the three previous quarters given a weight of 20%. The ranks are 33, 90, 63 and 64, sequentially from the most recent quarter. The weighted four-quarter relative price strength is 1.8%.
A higher-quality stock possesses traits associated with upside potential and reduced downside risk. Backtesting of the Quality Grade shows that stocks with higher grades, on average, outperformed stocks with lower grades from 1998 through 2019.
The A+ Quality Grade is the percentile rank of the average of the percentile ranks of return on assets (ROA), return on invested capital (ROIC), gross income to assets, buyback yield, change in total liabilities to assets, accruals to assets, Z double prime bankruptcy risk (Z) score and F-Score. The score is variable, meaning it can consider all eight measures or, should any of the eight measures not be valid, the valid remaining measures. To be assigned a Quality Score, though, stocks must have a valid (non-null) measure and corresponding ranking for at least four of the eight quality measures.
Cardinal Health has a Quality Grade of B, based on a score of 63, which is strong. The company ranks strongly in terms of its return on invested capital and F-Score. Its return on invested capital of 228.1% ranks in the 98th percentile among all U.S.-listed stocks, and its F-Score of 6 ranks in the 72nd percentile. The F-Score is a number between 0 and 9 that assesses the strength of a company’s financial position. It considers the profitability, leverage, liquidity and operating efficiency of a company. Cardinal Health also has a buyback yield of 2.0%, which is above the sector median of –6.3% and ranks in the 82nd percentile.
The components of the Growth Composite Score consider a company’s success in growing sales on a year-over-year and long-term annualized basis and its ability to consistently generate positive cash from its core operations. The company’s Growth Grade is A, which is very strong. Cardinal Health has generated positive annual cash from operations in the past five consecutive years and has a five-year annualized sales growth rate of 7.8%.
CVS Health Corp. (CVS) provides health solutions in the U.S. through three segments: health care benefits, health services, and pharmacy and consumer wellness. The health care benefits segment offers a wide range of insurance products and services, including medical, pharmacy, dental and behavioral health plans, as well as Medicare Advantage, Medicare Supplement and Medicaid services. The health services segment provides pharmacy benefit management solutions, such as plan design, formulary management, retail and mail pharmacy services, specialty pharmacy, clinical programs and medical cost management. The pharmacy and consumer wellness segment sells prescription and over-the-counter drugs, health and beauty products, and personal care items. It also distributes prescription drugs and provides consulting and ancillary services to care facilities. CVS Health operates retail and specialty pharmacies, compounding pharmacies, infusion service branches, long-term care pharmacies, on-site pharmacies and online pharmacy platforms. The company was incorporated in 1996 and is headquartered in Woonsocket, Rhode Island.
CVS Health has a Value Grade of B, based on its Value Score of 66, which is good value. The Value Grade is the percentile rank of the average of the percentile ranks of the price-to-sales (P/S) ratio, price-earnings (P/E) ratio, price-to-book-value (P/B) ratio, price-to-free-cash-flow (P/FCF) ratio, shareholder yield and the enterprise-value-to-EBITDA ratio.
The company has a price-to-sales ratio of 0.23, ranking in the 9th percentile. Its price-to-book ratio is 1.16 and its enterprise-value-to-EBITDA ratio is 10.4, ranking in the 31st and 39th percentiles, respectively. The price-to-earnings ratio is 19.8, ranking in the 50th percentile.
Earnings estimate revisions indicate how analysts view a firm’s short-term prospects. CVS Health has an Earnings Estimate Revisions Grade of B, based on a score of 75, which is positive. The grade is based on the statistical significance of its latest two quarterly earnings surprises and the percentage change in its consensus estimate for the current fiscal year over the past month and past three months.
CVS Health reported a positive earnings surprise of 23.9% for the second quarter of 2025, and in the prior quarter reported a positive earnings surprise of 34.6%. Over the last three months, the consensus earnings estimate for the third quarter of 2025 has decreased from $1.440 to $1.390 per share, due to 15 downward and two upward revisions. The consensus earnings estimate for full-year 2025 has increased from $6.131 to $6.302 per share, based on 18 upward and three downward revisions.
CVS Health has a Growth Grade of A, which is very strong. The company ranks in the 100th percentile for its five-year annualized sales growth rate of 7.7%.
Pediatrix Medical Group Inc. (MD), together with its subsidiaries, provides newborn, maternal-fetal and other pediatric subspecialty care services in the U.S. It offers neonatal care services, such as clinical care to babies born prematurely or with complications within specific units at hospitals through neonatal physician subspecialists, neonatal nurse practitioners and other pediatric clinicians. The company also provides maternal-fetal care services, including inpatient and office-based clinical care to expectant mothers and unborn babies through affiliated maternal-fetal medicine subspecialists, as well as obstetricians and other clinicians. In addition, it offers other pediatric subspecialty care services; newborn hearing screening; and support services in hospitals, pediatric emergency rooms, labor and delivery areas, and nursery and pediatric departments. The company was formerly known as Mednax Inc. and changed its name to Pediatrix Medical Group Inc. in July 2022. Pediatrix Medical was founded in 1979 and is based in Sunrise, Florida.
Pediatrix Medical has a Quality Grade of A, with a score of 86, which is very strong. The company ranks strongly in terms of its F-Score and its return on invested capital. Its F-Score of 7 ranks in the 85th percentile among all U.S.-listed stocks, and its return on invested capital of 61.6% ranks in the 89th percentile. Pediatrix Medical has a return on assets of 5.4%, above the sector median of –31.7%, and a buyback yield of –1.8%.
Pediatrix Medical has a Value Grade of A, based on a score of 81, which is deep value. The company ranks in the 12th percentile for both its price-to-free-cash-flow ratio and its enterprise-value-to-EBITDA ratio. The company has a price-to-free-cash-flow ratio of 6.1 and an enterprise-value-to-EBITDA ratio of 5.3. A lower price-earnings ratio is considered better value, and Pediatrix Medical’s price-earnings ratio of 12.7 is below the sector median of 25.2. The price-to-sales ratio is 0.71, which ranks in the 25th percentile.
The company has a Momentum Grade of B, based on its Momentum Score of 79. This means that the stock’s momentum is strong in terms of its weighted relative price strength over the last four quarters. The ranks are 60, 76, 43 and 92, sequentially from the most recent quarter. The weighted four-quarter relative price strength is 7.6%.
Pediatrix Medical has a Growth Grade of B, which is strong. The company ranks in the 60th percentile for its five-year annualized sales growth rate of 2.5%.