McKesson (MCK 0.25%), a healthcare supplier that was founded in 1833, is a value investor's dream. It has a relatively low valuation and strong long-term growth potential. Over the past three years, it also has delivered a total return of 485.64%.

The company has seen its shares rise more than 15% over the past year, though they have fallen more than 7% so far in 2023. McKesson recently raised its guidance for fiscal 2023, citing operational momentum.

The company's dividend isn't particularly generous, but its dependable revenue and net-income growth make it stand out. Considering the stock's sluggishness to start the year, does it still make sense to buy McKesson stock? Let's see.

What does McKesson sell?

The company doesn't sell to the general public but delivers products that pharmacies, hospitals, and medical professionals need: pharmaceuticals, medical supplies, and medical technology. It has more than 40,000 customers for its branded, generic, and over-the-counter pharmaceuticals. It carries more than 150,000 medical-surgical supplies, and it provides a variety of tech solutions for healthcare providers.

The company has more than 49,000 employees, and it sells its products in North America, Latin America, Europe, and Asia. The breadth of the company's products and the size of its markets make it more stable than other companies. If one side of its business is down, there's a likelihood a different area will be doing well.

Take a look at the company's fiscal 2023 third-quarter earnings, for example. The company's Medical-Surgical segment reported revenue of $2.986 billion for the quarter, a 3% decline year over year; through nine months, it had $8.421 billion, down 4% compared to the same period in fiscal 2022. The reason for the drop was a decline in sales related to COVID-19 tests and supplies needed for COVID-19 vaccines.

However, two of the company's other segments, Prescription Technology and U.S. Pharmaceutical, more than made up for the decline, reporting a revenue increase through nine months of 13% each, so the company's overall revenue through nine months was reported as $207.98 billion, an increase of 5% year over year.

Opioid settlement is in the rearview mirror

The concern about opioid lawsuits had been a drag on the stock's price until early last year when McKesson settled its share of the suits for $7.4 billion. That's a big number, but seeing as it is stretched over 18 years, it's really not that big a deal to McKesson, considering its yearly revenue.

More generous than you may think

As previously mentioned, McKesson's dividend is below average, yielding around 0.62%, less than half the S&P 500 average dividend yield of 1.74%. However, the company has increased its quarterly dividend for 15 consecutive years. Over the last two years, the raises have been in the double digits, including a 14.8% boost in 2022 to $0.54 per share. There's obviously plenty of room for more double-digit increases as its cash-dividend payout ratio is a low 6.85%.

McKesson is more shareholder-friendly than its dividends show because it has also been quite active in buying back its own stock. In the 2022 calendar year, it did $4.841 billion in stock buybacks, more than double the $2.017 billion in stock buybacks it did in 2021. The company has authorized at least another $3.8 billion in stock buybacks in fiscal 2023, which makes sense because the stock trades for about 15 times earnings, below the S&P 500 price-to-earnings (P/E) ratio average of 21.37.

Low margins, big moat

McKesson's margins are traditionally pretty tight, below 2%. Instead of that being a negative, its tight margins provide a moat to any potential disruptive competitors.

The wholesale pharmaceutical and hospital-supply industry is so consolidated that McKesson only has two real competitors -- AmerisourceBergen and Cardinal Health. The trio's scale and domination in the industry mean it is more difficult for any new companies to come along and disrupt their businesses as they are all built more on scale rather than fat margins. McKesson is the healthiest of the three, with the highest profit margin and the lowest debt-to-equity level. 

MCK Profit Margin Chart

MCK Profit Margin data by YCharts.

Instead of worrying about thin profit margins, look at the company's 69.25% return on capital invested, which shows really how profitable the company is.

Steady growth in revenue, income

McKesson is on its way to its 10th consecutive year of revenue growth. That shows how inflation-proof and recession-proof the company's stock is. This year, the company has increased revenue and earnings per share (EPS) every quarter.

Looking at its guidance, it is expecting more of the same. The company said it expects adjusted EPS in 2023 of between $25.75 to $26.15, up from earlier estimates of between $24.45 to $24.95 and a good-sized jump from 2022's adjusted EPS of $23.69. It also said it expects annual revenue to climb between 3% to 7% this year. That seems to be a conservative estimate as the company reported revenue of $207.8 billion through nine months -- what it made in revenue in all of 2022.

No, it's not too late to buy McKesson stock

Looking at its anticipated 2023 revenue, the company's shares trade at only 13 times forward earnings. Considering McKesson's strong cash flows and predictable growth, it seems to be a no-brainer purchase for any value investor. Yes, the dividend could be higher, but it is well covered, and its recent increases will likely continue. The company's efficiency and diversity make it an easy choice at its current price.