Cardinal Health's Relative Strength Rating Upgrade: A Catalyst for Near-Term Outperformance

Cardinal Health (CAH) has emerged as a compelling case study in the healthcare sector's 2025 resurgence, with its Relative Strength (RS) Rating upgrades serving as a critical catalyst for renewed investor interest. The RS Rating, a proprietary metric by Investor's Business Daily (IBD) that evaluates a stock's 52-week price performance relative to its peers, has climbed for CAH from 65 to 74 in recent months, according to an IBD report. While the score remains below the 80 threshold historically linked to market leadership, the trajectory reflects growing momentum and strategic alignment with sector trends, as explained in William O'Neil's proprietary ratings overview.

Strategic Reinvention and Financial Resilience

The upgrades coincide with Cardinal Health's aggressive pivot toward high-growth segments. At the Bank of America Global Healthcare Conference in January 2025, the company outlined a roadmap targeting 12%–14% annual earnings per share (EPS) growth, driven by expansion in Nuclear & Precision Health Solutions and supply chain innovations, as detailed in the conference transcript. These initiatives have already translated into tangible results: CAH reported 18% EPS growth in its latest quarter, alongside a 6% revenue increase, demonstrating operational efficiency and pricing power.

The company's focus on shareholder returns further strengthens its appeal. Cardinal Health has allocated $2 billion to stock buybacks in 2025, signaling confidence in its intrinsic value and aligning with broader investor preferences for capital-efficient strategies, as shown on its stock chart. This financial discipline, combined with a debt-to-equity ratio of 0.45 (below the sector average of 0.6), positions CAH to navigate macroeconomic uncertainties while maintaining growth momentum — a view reflected in a broader U.S. News guide to health-care names.

Historical Precedents and Sector Synergies

The RS Rating's predictive power is underscored by recent healthcare sector case studies. For instance, Tenet Healthcare (THC) saw its RS Rating jump from 67 to 77 in May 2025, followed by a 22% stock price surge in the subsequent three months, as reported in the Tenet upgrade. Similarly, HCA Healthcare (HCA) reached an 81 RS Rating in late 2025, coinciding with 24% EPS growth and a 15% revenue increase, according to an HCA report. These examples highlight a recurring pattern: healthcare stocks with improving RS Ratings often experience outperformance as institutional investors capitalize on relative strength.

Cardinal Health's trajectory mirrors this dynamic. Its 30.49% year-to-date stock price gain and third-place standing in the Medical-Wholesale Drugs industry group reflect the company's rising profile, per an IBD ranking. The healthcare sector as a whole has outperformed the S&P 500 in 2025, buoyed by undervalued fundamentals and defensive positioning amid economic volatility, as noted in Fidelity's sector outlook. With U.S. healthcare spending projected to grow at 5.6% annually through 2027, according to spending projections, CAH's strategic focus on innovation and operational efficiency aligns with long-term tailwinds.

Risks and Considerations

While the RS Rating upgrades are encouraging, investors should remain cognizant of sector-specific risks. Regulatory pressures, particularly around drug pricing, and margin compression in traditional wholesale segments could temper growth. However, Cardinal Health's diversification into high-margin areas like precision health and its robust balance sheet mitigate these concerns, as discussed in a Morningstar analysis.

Conclusion

Cardinal Health's upgraded RS Rating is more than a technical indicator — it is a reflection of strategic agility and financial resilience in a sector poised for growth. By leveraging its operational strengths and capitalizing on high-growth opportunities, CAH is well-positioned to close the gap toward the 80+ RS Rating benchmark, potentially unlocking further outperformance. For investors seeking exposure to a healthcare stock with both momentum and fundamentals, Cardinal Health presents a compelling case.