How will this expansion affect the overall valuation multiples (P/E, EV/EBITDA) for Cardinal Health?

Impact on valuation multiples

The Solaris Health add‑on lifts Cardinal Health’s (CAH) Specialty Alliance to roughly 3,000 providers in 32 states, deepening its urology franchise and expanding recurring‑revenue contracts. The deal is largely cash‑free and accretive to earnings, so the incremental net‑income and EBITDA are expected to rise faster than the incremental revenue. In a “buy‑and‑build” model this typically drives a multiple‑compression: the market will price the higher earnings at a similar or slightly lower P/E and EV/EBITDA than before the acquisition. Assuming the share price holds steady while Q4‑2024 earnings are upgraded by ~5‑7 % (the incremental contribution of Solaris and the broader urology platform), the P/E could fall from the current ~9.5× to the high‑8s, and EV/EBITDA could slide from ~7.0× to the 6.5‑6.8× range.

Trading implications

• Short‑term catalyst: The announcement may trigger a modest price rally as analysts upgrade earnings forecasts and re‑price the stock on the expected earnings boost. A 3‑5 % bounce on the next session is plausible, especially if the market has under‑priced the integration upside.
  
• Medium‑term positioning: If the earnings accretion holds and margins improve (e.g., higher pharmacy‑distribution mix, better cost‑share with MSO contracts), the compression of multiples will create down‑side protection for the stock—i.e., the price can rise on absolute earnings growth even as the P/E narrows. A long‑position with a stop around 5 % below the post‑announcement level captures the upside while limiting exposure to integration risk.
  
• Risk checks: Watch for any dilution from debt financing (if the cash‑free claim is later revised) and for integration lag signals in the next earnings call. A widening of the EV/EBITDA spread above 7× could signal that the market is still skeptical, offering a short‑entry opportunity on a pull‑back.
  

In short, the Solaris expansion should compress Cardinal Health’s valuation multiples as earnings outpace price, supporting a bullish bias on the stock with a focus on earnings‑driven upside and disciplined risk management.