Walgreen Company (WAG)

Might concerns over WMT generics be overblown? If CVS new release is accurate, this is a mole hill of a mountain, despite the remarks attributed to Walgreen brass today. Walgreen is expanding strategically and ranks as one of the highest quality companies we cover ... and the projected annual return is now 19% after the price mashing.

Best performing and fast growing drug store chain, organic grower except for a rare recent acquisition.
High profitability and strong balance sheet
Capable and honest management
Strongly undervalued

"Oh no, Wal-Mart's going to put all other pharmacies out of business!" No they're not, and even if they did, Walgreen's sells a lot more than just prescription drugs. The market over-reacted, and I'm right here to scoop up a bargain.

You've got to be kidding me. This is the easiest pick there could be (if I weren't so damned greedy and wanted 25%+ returns!!! :) )
Solid, solid, solid. If the whole market tanks, this will too. Otherwise, people are going to get older=on more drugs and can't stand to walk through a Wal-Mart (too big). Walgreen's isn't going anywhere and when the baby boomer's start wanting convenience (drugs mailed to them or not walk a mile to get to the Wal Mart windw) they're going to Walgreen's. Except where there's a CVS closer (but it's the same industry and will raise all ships on the rising tide). CVS will do well too, but I live in the Southwest, where everyone from the NE is moving as they get older...and Walgreens is the dominant player out here. This one is a slam dunk. I don't care what happens in the next 1-2 years, this is a buy price for 5-10 out. You aren't going to make 25% returns (except for year 7....mark my words) but you aren't exactly taking a big risk here, eh? Put a solid one in your portfolio so you can feel more free to jump at the "high-flyers" with a good, solid base. Cheers.

no debt, 6000 (and growing) locations on the busiest corners, 15% of the retail prescription market in the u.s., convenience, service, flexible hours, drive thru and customer retention programs (express pay, auto refill, internet storefront) and a nationwide network allows retirees to travel without the need to bring their entire drug history with them. In-out convenience and the above mentioned points far outweigh the risks associated with Walmarts generic pricing structure. These new prices will definitely impact operating margins of those stores located close to walmart outlets (with pharmacies). the existence of these walgreen-walmart paired locations are the exception and not the norm. Walgreens locations generally appear on tight corners on a small footprint with easy access from multiple angles close to city centers and retirement communities; real-estate parameters not in line with Walmarts strategy. at a current PE of 24.83, a dividend increase of 22% from a year prior and a declared dividend increase of 14% in 2007, and a commanding prescription u.s. market share, WAG is a perfect case of understated performance and will reward those who realize the current bargain.

Yes, it seems as if Walgreen is past it's big expansion phase. Is it like Walmart or Starbucks where it seems like there is a store on every block? Well, I don't think Walgreen is at that point yet. Yes, they are abundant, but I still see plenty of room to open additional outlets at this point. This company is well managed and lacks the drama that frankly I can do without. We have a squeaky clean balance sheet boasting zero long term debt. Return on equity is in the 17% range the last five years in a row. Shares are not being diluted by shareholder-unfriendly management. Earnings have an average growth rate of over 21% annually over the last five years. On the minus side, shares are not selling at a discount right now (3/1/07). Still, if one is concerned about safety then this is one boat that is unlikely to sink. This is a luxury cruiser...not a racing hydroplane.

Walgreen's growth story is incredible. They are opening a new store per day and comps are up. The stock is richly valued, but the growth will match it over the longer term.

I think its undervalued at current price point. It has dropped out of favor because of the Walmarts low cost generic drugs and I dont think it will have as big of an impact as everyone things it does.

i think the financials look decent on this stock. however, i have read some blogs on this stock. it seems they might have some law suits going forward and this could seriously hurt share prices going forward for sometime. also, i hear of price gouging from this company. also a negative for business. and then there is undercutting of prescription prices from online sellers which seem to be taking market share from this stock.
looks like they have their hands full trying to remedy these situations. therefore, i find the stock unattractive for at least a year. i feel this is one to watch closely to see how they navigate through these troubles before picking up any shares.

Christmas is coming and I know I want to get Scotch tape in the middle of the night. Guess where I'm heading to? Besides, does anyone see the RedBox DVD kiosk inside the Walgreen store? (wink, wink)

Walgreens(WAG) missed the quarter - the stock got killed, down about 15%.

Walgreen's stock was slightly undervalued before it was crushed 15% on Monday. With the stock closing at $40.16 today, I believe the shares have an Intrinsic Value of $60 - $65 per share based on my Intrinsic Value Model.

Walgreens is a Buy!

Kahuna,CFA

Although aI prefer a nice, neutral eggshell, green walls look nice too. They say geniusess'es prefer green.

10-yr earn per share growth = 16.3%.
Price of $45.19 & value of $58.65 (23 X est '07 cash flow per share of 2.55)=> undervalued by 28%. No long-term debt.
3-5 yr annual return of 15-22%

The recent earnings report shows that Walgreen continues to grow and improve margins. The Walmart generic drug pricing is not expected to have a significant effect on earnings, yet the WAG stock price has not recovered. The stock is still on sale.

Walgreens is trading at a very low PE ratio. Given its consistent and remarkable earnings over the last, I don't know 30+ years it is very attractive right now. Has about 0 LT debt on B/S has managed to grow almost completely organically (unlike CVS) and has superrior stores and managers relative to CVS. Even janitors have stock options and the employees of the store exude a sense of ownership. MGMT gets the job done right. Stock is down b/c of decreased revenue due to the increase of generics this year- Ironically gererics actually have a higher profit margin and they will add to overall profits.

Mr. Market got stupid about Wal-mart's entry into Rx

Rapid overexpansion leaves this company somewhat exposed. They are also not doing as effective a job in the generic drugs market as other drugstore chains/retail pharmacies. When you can get most generics for 4 bucks a month at target or walmart, why go to walgreens? CVS acquisition of caremark a while back was a trump. I see this stock underperforming in 2009.

Walgreen Inc. one of the largest drug store chains in the U.S., based on sales and store count, operates retail drugstore chains, that are engaged in the retail sale of prescription drugs contributing 64% of total revenue, non-prescription drugs sharing 11% and general merchandise, the balance. The company operates through brand names like Walgreen Health Services, Walgreen Mail Services, Walgreen Home Care and Walgreen Specialty Pharmacy, which form the growth pillars taking advantage of the industry growth drivers. During the fiscal year ended August 31, 2006, the Company opened 512 stores, increasing the total number of stores to 5,580 in 47 states and Puerto Rico.

In the near future, an aging population, increased sales of generic drugs, industry consolidation and improving merchandise offerings will lead to increased traffic trends and wider margins, proving to be beneficial for the industry as a whole. Pharmacy departments in the national drug retail chains continue to grow in importance, with prescription sales as a percentage of total sales approaching 70%. In addition, non-pharmaceutical sales trends continue to improve, reflecting better customer service levels and improved merchandising.

Sales in first quarter ‘07 were up 16.7% y/y driven by new store openings and acquisitions of Schraft's Pharmacy, Medmark Inc. and SeniorMed LLC. CapEx for fiscal 2007 is expected to be more than $1.7 billion dedicated to store expansion, distribution centres and technology. The capital expenditure is expected to be internally financed looking at the strong cash flows and retained earnings. Sales are expected to advance by 13% during FY 2007, fueled by the expected opening of about 500 new stores and pharmacy same store sales gains of 10%. The company anticipates opening a total of 7,000 stores by the year 2010. On the back of sound strategic moves and a favorable financial position Walgreen Inc. seems to be an outperformer.

There's reason to be nervous about competition heating up, but I like the chances that the company swims against the tide in this economy, and then benefits from the boomers for years after that. I've thumbed up CVS too, but I like WAG a bit more due to historical efficiency/profitability and a somewhat better balance sheet.

http://www.fool.com/investing/value/2009/02/10/5-all-star-stocks-fighting-the-tide.aspx