Struggling Pharmacy Stock an Intriguing Long-Term Option

Should investors buy Walgreens ahead of its upcoming earnings report?

facebook twitter linkedin


Walgreens Boots Alliance, Inc. (NASDAQ:WBA) is one of the largest retail pharmacy chains in the U.S., as well as an international retail pharmacy and a pharmaceutical wholesale business. As the name would suggest, the company includes Walgreens, Boots, and Alliance Healthcare under its umbrella.

Last night, WBA closed at $35.95, significantly closer to its 52-week low of $33.88 than its 52-week high of $64.50. Walgreens' stock is down nearly 40% year-to-date, and has been trending downward for the last two years. However, as a prospective long-term investment, WBA stock has a lot to offer. The company will be looking to re-establish its value in the upcoming earnings announcement slated for before the open on October 15.

Walgreens has a market cap $31.15 with a book value per share of $23.83 and its MRQ price/book value is 1.46. The company sports a seemingly high trailing 12-month price-to-earnings ratio of 42.34, but a forward price-to-earnings ratio of just 7.04. Walgreens also has a trailing price-to-earnings ratio of 41.21.

Walgreens’ earnings per share (EPS) currently stands at $0.85 over the past 12 months. In the most recent quarterly financial report, Walgreens reported earnings of $0.83 per share, which was $0.34 less than the $1.17 that was expected. Walgreens has beat analyst expectations 50% of the time over the past 4 quarters (beating earnings projections twice and missing expectations twice, too). The speculation on upcoming earnings has Walgreens pegged to report an EPS of $0.96. Overall, Walgreens' earnings have demonstrated consistent growth on an annual basis for the past three years.

Aside from a notable drop in this year, Walgreens has only seen minor inconsistencies in its net income on an annual basis. The company’s increasing expenses have shown to be the largest obstacle to growth in total net income. Walgreens has maintained a positive net income this year despite the noted overall year-over-year decrease.

Walgreens Boots Alliance has $86.44 billion in total assets, with $777 million of that in cash and cash equivalents. Meanwhile, the company has $41.78 billion in debt and $65.12 billion in total liabilities. Walgreens’ has a total equity of $21.32 billion on its balance sheet. Further, the company has a forward dividend of $1.87 per year and a forward dividend yield of 5.11%. Walgreens paid $0.468 to investors in the most recent quarter.

During the worldwide uncertainty as the coronavirus pandemic rages on, Walgreens has not opted for the "safe route" of cutting dividend payments. Although this decision may be viewed negatively from an investor standpoint, Walgreens is demonstrating stability and longevity with this decision. The pharmacy giant is on pace to end the year in profitable territory. Unlike other similar companies who won’t be bottom-line profitable this year, Walgreens can afford to keep paying its dividend without looking desperate for investor interest.

Furthermore, with a forward dividend yield of 5.11% and a long-standing history of dividend growth, Walgreens stock offers one of the most secure and highest paying dividends when compared to all current big market cap companies. It also provides a very promising value given its price/book value of 1.46 and a forward p/e ratio of 7.04. Overall, WBA stock is an intriguing option worth considering for both value investors and dividend investors.


A Schaeffer's exclusive!

The Expert's Guide

Access your FREE trading earnings guide for Q3 before it's too late!


  
 
Special Offers from Schaeffer's Trading Partners