The Company's current operations are grouped into two businesses: Retail Pharmacy and Pharmacy Benefit Management.
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CVS may be the largest drug chain, but not the best. Walgreen's has that distinction. CVS is increasing size thru debt financing, WAG is virtually debt-free. Once Wag is finished it's rapid expansion, shareholders will reap their rewards. CVS is the Avis of drug chains. Hey, exactly where is Avis today?
Personally I'm a Walgreens fan, but from a competitive standpoint CVS is developing fast and I would not worry about their debt in the long run. Competition is great for the consumer, not necessarily the stock holders. I believe CVS and WAG will both provide returns on 20-25% over the next couple of years. Both companies have solid P/Es and EPS. The key with debt financing is leveraging the debt for higher revenues. As long as CVS grows EPS while adding debt the stock price will grow. Wall Street consensus is calling both CVS and WAG to have 10% EPS growth 2009. I recommend buying both to hedge the bets.
Yeah, I would go along with your last recommendation. Really, both of the drug chains are going to grow, probably whipsawing back and forth, vying for current quarter/year leadership. Can you really go wrong?
Candis