Walgreen Company (NYSE:WAG)

CAPS Rating: 4 out of 5

Walgreen is your corner drugstore, selling prescription and OTC drugs and an array of other merchandise.

Recs

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Player Avatar oshet (< 20) Submitted: 2/14/2013 10:39:30 PM : Underperform Start Price: $41.42 WAG Score: -21.98

Use whatever method you want, it is down from here. Beginning of a H&S? End of an ABC correction? It will be a lot closer to $20 than $40 by next year.

Member Avatar JohnCLeven (76.94) Submitted: 2/23/2013 5:07:46 PM
Recs: 0

Hello,

Pardon my ignorance, but could you please elaborate on your methods, particularly regarding WAG? (H&S, ABC correction, etc)

You're betting WAG will be below $30 (aka alot closer to $20 than $40) next year, which would also mean a market cap below $30 billion.

That would imply that WAG will be selling, next year, between 1x-1.5x book value, with a 4-5% dividend yield, while generating somewhere between $2 billion an $3 billion in free cash flow in 2013 (6.67-15% free cash flow yield based on $20-$30 price range)

Barring a serious bear market, or unforseen crisis within the business, I think it's very unlikely to see a consistent grower like WAG dropping to THAT price level.

And on the off chance that such an event were to occur, WAG would keep buying back stock as they have in the past, and it would almost certainly be a wonderful oppurtunity to buy WAG, like late June/early July 2012 was.

Thanks for your feedback!

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