| Stock (Symbol) | Stock Price | |
Express Scripts (ESRX) |
$53 |
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| Data is as of | Expected to Report | Sector |
November 21, 2010 |
Feb 21 |
Healthcare |
| Sharek’s Take | ||
 When you own Express Scripts, you know what you’re getting. A stable drug-wholesaler (pharmacy benefit manager, PBM) which delivers steady profit growth each quarter. This quarter’s especially enticing because ESRX has formed a cup-and-handle in its one-year chart pattern, and a cup-and-handle often preludes a strong move higher.On the business side of ESRX, the company recently purchased NextRx from Wellpoint (WLP) and 90% of those customers have been converted to Express Scripts’ system. NextRx customers weren’t utilizing generic drugs like ESRX customers were — so you can expect representatives will now be recommending (pushing?) the higher profit margin generic drugs in the next year. This should lead to good profitability for the next couple of years. |
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| One-Year Chart | ||
 Here’s the one-year chart with the cup and handle pointing at a breakout if the stock closes above $54. With estimates of 43% and 33% profit growth ahead and a P/E of only 17 ESRX could make a big push higher if it does indeed breakout. The stock is only a dollar away. Profits are abnormally strong right now because of the NextRX profits. |
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| Earnings Table | ||
 Profits rose 59% last quarter as sales doubled (100% exactly).ESRX used to grow in the single digits before the NextRX purchase. Note past quarterly profits are highlighted in green, that signifies ESRX comes through with record profits each quarter.ESRX only met estimates last quarter. You know what you’re getting here. Annual Profit Estimates show 28% profit growth expected for 2011 and 21% the year after. I like the steady growth ESRX gives investors. Profit growth is expected to be 43% next quarter then subside to 28-26% later in 2011. |
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| Fair Value | ||
 ESRX is worth 25 times earnings. Although investors haven’t cherished this stock enough to give it a 25 P/E, I think they are wrong and I am right. Priceline.com (PCLN) got a P/E in the teens for half of a decade before investors woke up this year and pushed the P/E to 30. If ESRX breaks out a good target is $70, which implies a P/E of 22 (very reasonable) and that would be 32% higher from here. |
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| Ten-Year Chart | ||
 Express Scripts has one of the most remarkable ten-year charts I’ve ever seen. Now you see why I think a P/E of 25 is justly deserved. |
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| Power Ranking | Bottom Line | |
Growth Portfolio
4 of 18 |
Express Scripts is one of my favorite stocks — you know what you are getting: steady profit growth every quarter. This is a solid selection for conservative investors and the stock provides stability with growth for aggressive investors. In my Power Rankings ESRX is raked 4th in the 18 stock Growth Portfolio. and 4th in the ten stock Aggressive Growth Portfolio. Watch for a breakout, which could push ESRX from $53 to $70. If that happens, I intend to keep holding this stock as its a real winner for the long-term. |
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Aggressive Growth Portfolio
4 of 10 |
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