1 / 20

Walgreens

This recommendation suggests holding 1,000 shares of Walgreens due to their industry leadership, rapid expansion, and potential benefits from demographic changes and new medications.

jweaver
Download Presentation

Walgreens

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript


  1. Walgreens David Mizell Date Presented: 12/09/2004

  2. Recommendation • Recommendation: Hold • Own 1,000 Shares in Walgreens • Purchased at $25/share on 10/6/1999 • Cost Basis is $25,000 • Trading at $38.31 as of 12/8/2004 • Value currently $38,310 • Stock has gained $13,310 over holding period, up 53.24%

  3. Company Overview • Industry • GICS – Drug Retail • Competitors – Rite Aid, CVS, Osco • Corporate Info • Founded in 1901 by Charles R. Walgreen, Sr. in Chicago • Operate in 44 states • Have 4,582 stores and 163,000 employees as of 8/31/2004 • Expect to have 7,000 stores by 2010

  4. Company Overview • Innovations • Introduction of Lunch Counters – 1910 • Ice cream when warm • Hot food when cold • The Malted Milkshake • First Drugstore Chain to Advertise on radio – 1931 • Profit-Sharing and Pension Plans • “Self-Service Retailing” • Largest Private Satellite User

  5. Past Financial Performance • Total revenues were: - $28,681,100,000 in 2002 - $32,505,400,000 in 2003 - $37,508,200,000 in 2004 •  Basic net earnings per share: - $1.00 in 2002 - $1.15 in 2003 - $1.33 in 2004

  6. Walgreens’ Numbers • Market Cap is 39.15B • P/E (ttm) is 29.04 • EPS (ttm) is 1.33 • Revenue (ttm) is 37.51B • Operating Margin (ttm) is 5.71% • Profit Margin (ttm) is 3.63% • Beta is .259

  7. Stock Price Over Last 5 Years

  8. Financial Analysis • P/E Approach • Returns a price of $44.45 • DCF • Returns a price of $38.24 • View Excel Spreadsheet

  9. Walgreens vs. S&P 500

  10. Competitor Comparison • Walgreens • Market Cap:39.15B • Employees: 117,000 • Rev. Growth (ttm):15.40% • Revenue (ttm):37.51B • Net Income (ttm):1.36B • EPS (ttm):1.33 • P/E (ttm):29.04 • CVS • Market Cap:18.07B • Employees: 100,000 • Rev. Growth (ttm):10% • Revenue (ttm):29.12B • Net Income (ttm):912.6M • EPS (ttm):2.233 • P/E (ttm):20.23 Rite Aid • Market Cap:1.78B • Employees: 36,250 • Rev. Growth (ttm):5.1% • Revenue (ttm):16.87B • Net Income (ttm):172.06M • EPS (ttm):.039 • P/E (ttm):11.13

  11. WAG vs. CVS and RAD (1 year)

  12. WAG vs. CVS and RAD (5 year)

  13. Porter’s Five Forces • Threat of New Entrants: Moderate • Threat of Substitutes: Low • Bargaining Power of Buyers: High • Industry Rivalry: High • Bargaining Power of Suppliers: Low

  14. Macroeconomic Review • Aging Population • 12.4% Over Age of 65 – 2001 • Growing Due to Retirement of “Baby Boomers” • Importation of Drugs from Canada • Could Deprive Walgreens of Revenue • Being Discussed or Implemented across US by States • Canadian Parliament is Concerned • Bush Against the Policy

  15. Macroeconomic Review • Domestic Political Health Care Issues • New Medicare Prescription Drug Plan • Adds 75-100 Million New Prescriptions into the Market • Does Reduce Amount Medicare Pays Each Individual Prescriptions –Make up in Volume • Medical Savings Accounts-Bush’s Plan

  16. Company and Business Practices • Currently have 4,582 stores in 44 states as of 8/31/2004 • Opened 436 stores in 2004 • Goal to open 450 stores in 2005 • Major Expansion in CA, NC, SC, FL, TX, WA • Expect to have 7,000 stores open by 2010

  17. Company and Business Practices • Revenues • Drug and In-Store Merchandise Sales • Gained Market Share in 55 of top 60 Product Categories – Food, Drug, and Merchandise • Mail Order Business • Advantage90 Plan • Prescriptions account for 62% of total sales

  18. Company and Business Practices • Leases • No Debt, but Billions in Leases • 18% of Locations Owned, Rest Leased • Have roughly $20 Billion in Future Lease Payments – Most Leases 20-25 Years • Approx. $2 Billion Due Next Year Alone

  19. Company Updates • Walgreens is expanding rapidly. • Added 436 stores in 04 • Expect to add 450 stores in 05 • Aging Population and New Medications will Benefit Walgreens • Concerns • Political Issues • Mail Order Competition • No Debt, but a Large Amount of Leases

  20. Recommendation • Recommendation: Hold 1,000 shares • I believe Walgreens will continue to lead their industry and rapidly expand. The demographic changes in America will greatly benefit them, especially over the next 5-10 years as the Baby Boomer generation starts to retire. Over the next 15-20 years, the number of retired persons in America is expected to increase dramatically. All of these factors point to Walgreens having continued success in the short and long term. • Questions?

More Related