You may have come into contact many times with McKesson (NYSE: MCK) without even realizing it. The healthcare company doesn't develop drugs, but it distributes a lot of the pharmaceutical products sold today. And in this behind-the-scenes role, McKesson has excelled.
The company has increased revenue over time and delivered gains in free cash flow. In fact, free cash flow has generally topped $4 billion in recent years. And this has helped McKesson invest wisely in its future.
The stock price performance has reflected this success. Over the past three years, McKesson stock has climbed nearly 160%. Could this top performer help you become a millionaire? Let's find out.
The safety of healthcare
One of the things I like about McKesson is it offers you the safety of healthcare without one of the industry's biggest risks: the risk of a product candidate failing in development. You don't have to worry about that with McKesson. But you do benefit from the idea that people need their medications, no matter what the economy is doing -- and that translates into earnings for this healthcare giant.
Speaking of earnings, one particular element weighed on the company in recent years: McKesson's European activities. That business back in 2019 posted a widening loss, at $1.9 billion. Since then, the company realigned its activities into the segments of U.S. pharmaceutical, prescription technology solutions, medical-surgical solutions, and international. And McKesson decided to divest its European businesses -- it's exited all but one so far -- and focus on the U.S. and Canada.
McKesson also has shifted focus to its highest-growth areas. These are the company's oncology ecosystem and its selection of biopharma services.
McKesson has built a significant presence in the world of oncology treatment. Its U.S. Oncology Network serves 15% of new patients in the U.S. -- and McKesson continues to add new practices to the network. Last year, the company formed a joint venture with HCA Healthcare's Sarah Cannon Research Institute to increase doctor and patient access to oncology clinical trials. And McKesson predicts its oncology platform will deliver strong growth and margin contributions moving forward.
$100 million invested
As for biopharma services, McKesson has invested $100 million per year over the past three years in this area. And it doesn't plan on stopping here, as it sees major growth potential in this business. The latest move was the acquisition of Rx Savings Solutions -- a platform that helps users lower their prescription drug costs.
McKesson will continue to prioritize these growth areas and at the same time reward shareholders through a rising dividend and share repurchases.
So let's get back to our question: Can McKesson help you along the path to millions? The stock has increased over time -- and now isn't too far off its record high.
At the same time, McKesson only trades for about 13 times forward earnings estimates. That seems pretty reasonable considering its growth plan. And McKesson's focus on higher growth areas could offer the company a significant boost to revenue in the years to come.
A group of quality stocks
Still, McKesson isn't a high-growth company that's likely to double or triple in a short period of time. On its own, it probably won't bring you millions unless you invest millions in the stock. But the company could be part of a group of quality stocks that may help you become a millionaire.
The company has a positive earnings track record and a strong level of free cash flow to support investments. McKesson also has made the wise decision to shift out of businesses that were holding it back and into higher-growth areas.
All this means that if you buy McKesson shares today, you're likely to benefit from share price performance and passive income over time -- and your dream of becoming a millionaire could become a reality.
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Adria Cimino has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends HCA Healthcare. The Motley Fool recommends McKesson. The Motley Fool has a disclosure policy.