3 Retail Drugstores Worth Considering
Brian is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
As we all get older, one of the unfortunate ramifications is the greater need for medicine. While that's not something I look forward to, I try to look at the brighter side of things and see that many companies should be able to make money of this fast-growing trend with the aging baby-boomers. Below are three retail drugstores that are well-positioned to capitalize.
CVS Caremark (NYSE: CVS) is a retail giant with $104 billion in revenue and approximately $3.5 billion in net income this past year, putting it in the league of retailers Costco and Wal-Mart, both of which have recently invested heavily in growing their profitable drug retail divisions.
With the company right near an all-time high, it seems as though CVS is too expensive. However, I don’t see that to be the case with it trading at a reasonable 16.5x trailing P/E, 13x forward P/E, .5x P/S, .6x EV/S, strong FCF this past year of approximately $2.8 billion, and consistently growing 1.6% dividend yield.
Walgreen (NYSE: WAG) is not too shabby in size as well, churning $73 billion in revenue and $2.7 billion in net income this past year, comparing favorably to fellow retailer Target (NYSE: TGT). WAF has fallen on tough times of late, trading just off its 52-week low, but showing some great value. At just an 11x trailing and forward P/E, .4x P/S and EV/S, 5.9x EV/EBITDA, great FCF this past year of approximately $2.4 billion, and consistently growing 2.7% dividend yield, I think WAG is a nice buy.
Rite Aid (NYSE: RAD) is the smallest of the companies mentioned, but still had a sizeable $25.5 billion in revenue this past year. The company also lost over $400 million in net income during the same time period, but was still able to generate over $200 million in FCF.
This company is definitely the riskiest of the bunch as it pays no dividend, has lost money for years, and has a big $6.3 billion debt-load, but trades at a paltry .05x P/S, .3x EV/S, and recently same-store sales have exceeded analyst estimates and resulted in RAD trading approximately 40% higher from just three months ago. Essentially, the bad news is so baked into RAD that we see the beautiful results that can and are happening when any hint of good news comes about. Again, RAD is only for the most aggressive investor.
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