With shares of Walgreen (NYSE:WAG) trading at around $33.33 is WAG an OUTPERFORM, WAIT AND SEE, or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:
C = Catalyst for the Stock’s Movement
October was a little scary for Walgreen, but investors are beginning to get back on board. The company has a renewed partnership with Express Scripts (NASDAQ:ESRX) and a 3.30% yield, making Walgreen a more attractive stock to own. Its main competitor is CVS Caremark (NYSE:CVS). There’s a good chance that if you have a Walgreen in your area, there’s also a CVS. Think of it as two fast food chains or gas stations competing against one another from across the street. It works the same way since competition breeds success, and the results are similar.
However, if you look at both max charts, you will see Walgreen has greatly outperformed CVS throughout the years. In addition to that, Walgreen’s 3.30% yield is more enticing than CVS’s 1.40% yield. If you’re thinking about Rite Aid (NYSE:RAD), it shouldn’t even be considered in this conversation. Rite Aid doesn’t compare to Walgreen or CVS in any area, including yield (Rite Aid doesn’t offer a dividend.) Basically, Walgreen is the best option in this group.
E = Debt to Equity Ratio is Low
Walgreen has a debt-to-equity ratio of .30. This is similar to CVS’s debt-to-equity ratio of .27.
In regards to cash vs. long-term debt, Walgreen has $1.29 billion in cash and $4.07 billion in debt. Walgreen also has over $4 billion in operating cash flow. CVS has 1.23 billion in cash and $10.04 billion in debt. CVS has over $5 billion in operating cash flow. Once again, we see relatively similar numbers.
T = Technicals on the Stock Chart Are Subpar
Walgreen has underperformed the S&P 500 for several years. However, you shouldn’t look into this too much because investors have gone with more risk-on opportunities. While the parabolic stocks have been making investors a lot of money over the past few years, Walgreenswill continue to saunter along, making investors consistent money while those former parabolic stocks see their days of reckoning.
Over the past month…