| Stock (Symbol) | Stock Price | |
Express Scripts (ESRX) |
$45 |
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| Data is as of | Expected to Report | Sector |
May 13, 2011 |
Jul 25 |
Healthcare |
| Sharek’s Take | ||
 Express Scripts has dropped from $60 to $45 since I reviewed the company last quarter. The fall in the stock price leaves shares with solid appreciation potential. The reason for the drop is Healthcare stocks have been under pressure as the government pay have to tighten Healthcare spending. The whole sector got hit. The funny thing is the stock market is now in a correction because there’s a 50/50 chance of a recession next year. Healthcare stocks are solid stocks when we go into a recession, so if the economy is indeed going to pull back, ESRX should prosper.Express Scripts has agreed to purchase Medco Health Solutions (MHS). If the government approves the deal, Express Scripts will be twice as large as CVS/Caremark (CVS). ESRX is paying cash and stock for MHS, I don’t know how that will affect EPS, but management thinks synergies will result in cost savings. |
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| One-Year Chart | ||
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| Earnings Table | ||
 Profits grew 18% last quarter. Sales were up 1% and are usually flat. ESRX makes more profit off the same amount of sales because people move into higher-margin generics. This lowers costs and increases profitability. I want to point out ESRX used to have record profits each quarter (consecutively) and that streak ended 2QtrsAgo.ESRX only met estimates last quarter. It usually comes close to projections, doesn’t miss or meet by much. Annual Profit Estimates fell a little bit. We will have to see what happens to Annual Estimates once the Medco deal closes and the companies begin to merge. A slew of generics will hit the market in 2012 and 2013 and will be a boost for profitability Quarterly estimates look really good. 30% growth could be here for the next four quarters. Nice. |
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| Fair Value | ||
 Shares of Express Scripts are extremely undervalued. This stock has the ability to make it to 22 times earnings. There’s currently 55% upside to Fair Value this year and 90% next year. |
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| Ten-Year Chart | ||
 Express Scripts is at a perfect buying opportunity on the ten-year chart. I really think this stock is a great value now. The P/E is only 14!During the past ten-years ESRX has compounded at 21% a year. The earnings have compounded at a 32% clip. These two numbers should be more similar. I think ESRX has some catching up to do. |
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| Power Ranking | Bottom Line | |
Growth Portfolio
12 of 19 |
Express Scripts is a deal right now. The stock is cheap and fundamentals are strong. Shares should be 50% higher right now. There’s a chance this stock could double by next year.ESRX moves up to the 12 spot in the 19th stock Growth Portfolio Power Rankings. I could purchase the stock in the Aggressive Growth Portfolio but with the market down I’m looking at higher volatility stocks that could bounce quicker when the next rally begins. | |
Aggressive Growth Portfolio
N/A |
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Last quarter the one-year chart showed a breakout to a 52-week high. This one-year chart shows a breakdown. Or maybe a collapse. This month has been very volatile for stocks (they are all down). Profit growth looks solid ahead in the Estimates (bottom/right). And how can’t I miss the 14 P/E. Lovely buying opportunity we have here.