Stock (Symbol) |
Walgreen’s (WBA) |
Stock Price |
$82 |
Sector |
| Food & Necessities |
Data is as of |
| November 16, 2015 |
Expected to Report |
| N/A |
Company Description |
 Walgreens Boots Alliance, Inc. (Walgreens Boots Alliance) is a holding company. The Company is a global pharmacy-led, health and wellbeing enterprise. Walgreens Boots Alliance operates through three divisions, including Retail Pharmacy USA, Retail Pharmacy International and Pharmaceutical Wholesale. The Company’s products are marketed under a number of brands, which include No7, the Botanics range, Almus (generic medicines), Boots Pharmaceuticals and Soap & Glory (bathing and beauty brand). In addition, the Company has investments in Guangzhou Pharmaceuticals Corporation and Nanjing Pharmaceutical Company Limited. The Company operates in around 25 countries, which include the wholesale and distribution network with over 340 distribution centers and more than 180,000 pharmacies, health centers and hospitals in 19 countries. Source: Thomson Financial |
Sharek’s Take |
 Walgreens Boots Alliance (WBA) will acquire Rite Aid, paying cash but no stock, so this means earnings per share (EPS), or profits, will go up. Well, maybe not. WBA had a $3 billion stock buyback program it was working and will now stop buying back to help pay for this $9 billion acquisition. So one positive, one negative, but in the end they get a bigger company which will help them negotiate better drug prices. This is Walgreens 2nd big buy in two years. On December 31, 2014 Walgreen’s merged with Alliance Boots, which is made up Boots UK, the UK’s leading pharmacy-led health and beauty retailer, and Alliance Healthcare, the largest pharmaceutical wholesaler in the UK. Boots Alliance management is smart, doing things to help profitability like getting higher profit margin items at the front of the store. Drugstore stocks aren’t hot right now, but this company is moving in the right direction. WBA is a 14% grower (est) that pays a 2% dividend and sells for just 18x earnings. It once grew profits 34 consecutive years and has increased its dividend 39 straight years. I feel this stock is worth 21x earnings and my 2016 Fair Value is $93 (+13%). |
One Year Chart |
 After the 1st merger WBA stock was hot while the company was beating analyst profit estimates. It beat again last qtr, but that was just by 7 cents — down from 15 cents 2QtrsAgo and 23 cents 3QtrsAgo. That might have taken some air out of the stock. Also the pharmacy stocks aren’t doing too well right now. The P/E of 18 is reasonable. WBA’s Est LTG is 14% per year, tack on a 2% yield and this could deliver 16% total annual returns (hypothetically). Qtrly profits are expected to grow 15% a qtr the next 4 qtrs. |
Fair Value |
 Back in the 2000’s Walgreens had a high P/E as it was growing rapidly. Then profit growth slowed around a decade ago and the stock’s P/E had to gradually come down into the teens. In 2009 the company had its consecutive year of record earnings streak end — at 34. |
Bottom Line |
 Walgreens has a lot of appeal. It’s a safe stock which has a mid-teens expected growth rate in addition to paying a dividend that has increased for almost 40 years. WBA is also reasonable, selling for a modest 18x earnings. Although Rite Aid will take money away from stock buybacks I’d rather have a bigger company than a lower share count. Walgreens ranks 13th of 30 stocks in the Conservative Growth Portfolio Power Rankings but just 21st of 34 stocks in the Growth Portfolio Power Rankings as its upside to Fair Value is just 13%. |
Power Rankings |
Growth Stock Portfolio
21 of 34Aggressive Growth Portfolio N/AConservative Stock Portfolio 13 of 30 |
