Walgreen Boots is valued at 21 times last year’s earnings. If we assume that the company will make $4.00 in 2017, the forward P/E ratio comes in at 20.
Because the company has a lot of intangible assets the Price to Book comes in at 19.7, which is very high.
In summary, I would not buy shares in Walgreen Boots at this time.
Walgreen Boots Alliance is an American pharmacy chain with many business areas in the health sector.
At $78 and a trailing P/E of 20.3, the company is expensive. Looking at an average of the past three years’ earnings, the P/E comes in at 23.7 which is not better. Because of their intangible assets the Price to Book value is also very high at 19.0.
The company has a Debt to equity ratio of 1.4 and a Working capital to debt ratio of 0.2 which is OK, but not extraordinary. The Net working capital is $8.9 bn which of course is a lot of cash.
Last year, the Return on equity was 14 per cent which was OK, but not extraordinary. A high Return on equity usually correlates with a high Free cash flow.
Last year Walgreen Boots had a Free cash flow of $6.5 bn which allows them to buy back a lot of the expensive shares that they have issued.
It also allows them to pay a dividend of 1.46 (1.9 per cent). The dividend has been uninterrupted and increasing for at least 25 years.
The company is too expensive at these prices. Ideally I would like to see them fall by 50 per cent before dipping my toes.
There is nothing wrong with the company, but it is simply too expensive.