Back to top

Image: Bigstock

Bear of the Day: Walgreens Boots Alliance (WBA)

Read MoreHide Full Article

Walgreens Boots Alliance ((WBA - Free Report) ) is a Zacks Rank #5 (Strong Sell) that has a C for Value and a D for Growth. This drug store has been under pressure for what feels like years now. The industry of Retail – Pharmacies and Drug Stores is in the Bottom 9% of our Zacks Industry Rank. This makes it a great candidate for my Bear of the Day article.

Description

Walgreens Boots Alliance, Inc. operates as a healthcare, pharmacy, and retail company in the United States, the United Kingdom, Germany, and internationally. It operates through three segments: U.S. Retail Pharmacy, International, and U.S. Healthcare.

Earnings History

I like to see stocks with big earnings beats, not the other way around. When I look at WBA I see two disappointing results in a row. the company missed by a penny last quarter and six cents the quarter before that.

Earnings Estimate Revisions

Earnings estimate revisions have been going one day and that way is down.

Over the last sixty days no fewer than nine analysts cut their number for the full year. Five have done the same for next year.

That sent full year estimates down from $3.97 to $3.53. Next year’s number is down from $4.47 to $3.89.

Growth

Obviously these downward revisions are stunting growth. I see full year sales growth down at 2.5%. Next year is estimated at 5.3%.

For earnings, this year is contracting by 11.3%. Next year calls for a return to growth of 10%. Average those two years out and you still have contraction coming.

Valuation

The lack of growth has valuations very cheap. Forward PE is only 6.6x for the value crowd out there.

I see price to sales a paltry 0.14x. You have to ask yourself if this is a value play or a value trap?

Alternatives

I see a few names in the industry which have better Zacks Ranks. These include Zacks Rank #3 (Hold) stocks CVS Health ((CVS - Free Report) ) and Rite Aid ().


See More Zacks Research for These Tickers


Normally $25 each - click below to receive one report FREE:


CVS Health Corporation (CVS) - free report >>

Walgreens Boots Alliance, Inc. (WBA) - free report >>

Published in