McKesson has grown its net margins from 1.0% in 2022Q4 to 1.3% in 2023Q4 and 1.6% in 2024Q4. This consistent margin improvement indicates MCK is successfully executing operational initiatives to drive greater efficiency and profitability in its core distribution business. Expanding margins suggest the company is able to leverage its scale and market leadership to improve pricing, optimize logistics, and control costs. MCK generated $307.1B in revenue in 2024Q4 with $3.1B in net income, yielding a 1.0% net margin. This compares to $282.8B in revenue and $2.8B in net income (1.0% margin) in 2023Q4. The data shows MCK has grown its revenue by 8.7% year-over-year while expanding net margins from 1.0% to 1.6% over the past 2 years. This indicates the company is not simply growing top-line, but also driving meaningful operational improvements. Given MCK's leading market position, scale advantages, and demonstrated ability to improve profitability, I believe the company has a clear path to further margin expansion. Continued progress in supply chain optimization, procurement, and pricing power should allow MCK to steadily grow its bottom line at a faster rate than revenue. I see MCK reaching a 1.8-2.0% net margin target within the next 12-18 months, representing 25-40% upside to current profitability levels. This would translate to $5.0-5.5B in annual net income on $320-330B in revenue, driving a commensurate increase in the company's valuation.

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