The following company analysis is about Walgreen Boots Alliance, one of the dividend aristocrats out there. In the last couple of months WBA experienced a decent drop in its share and like almost every stock in the consumer sector under performed the market.
Company Overview
Walgreens Boots Alliance, Inc. (WBA), formerly known as Walgreen Company, is the largest drugstore chain in the United States. As of January 31, 2012, the company operates 8,300 stores in all 50 states, and has over 176,000 employees. The company offers consumer goods and services, a pharmacy, and health and wellness services. It offers its products and services through drugstores, through the mail, by telephone and online. WBA was founded in 1901, and is headquartered in Deerfield, IL. Walgreen has been paying dividends since 1972, and has increased them annually since 1976. Walgreen is a dividend aristocrat, which means it has been increasing dividends for more than 25 years consecutively.
Stock analysis
Currently WBA is priced at 67.94 USD per share, which is 29.7% below its 5 year high of 96.60 USD in July 2015. The drop in the share price is again one of typical market overreactions, driven by fears of lower margins etc.. But nevertheless you always should keep in that this company will stay profitable, even they will lose some of its current margin.
Current Valuation
As you can see the current ratios are besides of the Price/Sales ratio all below the 5 year average. Using my current method to calculate a fair share price based on the 5 year average numbers, I would get a price of 89.50 USD so from that perspective the current level of the share is fair. If I use the Market Fair Value Ratio according to morningstar I would get a priceof 73.05 USD.
The outlook for WBA is expecting a 5-Year growth of 8.1% which results in a forward P/E ratio of 12.4. In my further analysis I also included a simple calculation with the following Graham Formula:
