Wal-Mart Stores, Inc. (WMT), Walgreen Company (WAG) and Dollar General Corp. (DG): What Should You Buy?

Page 1 of 2

Walgreen Company (NYSE:WAG) reported a fairly solid quarter. When compared to other retail opportunities, this company possesses something that may not be found elsewhere.

Earnings highlights and analysis

The company reported $17.7 billion in sales for the quarter. The company grew sales by 3.2%. The company reported 22.9% year-over-year growth in operating income. It also came out with 29.3% year-over-year growth in adjusted net earnings. The company’s adjusted diluted EPS grew by an astounding 18.1% year-over-year in the quarter.

Walgreen Company (NYSE:WAG)

Walgreen Company (NYSE:WAG) was able to grow sales by a modest amount, but with better management of cost the company was able to generate the significant improvements in earnings. The company has a net profit margin of 2.9%, and could see a lot of improvements in net income, with a slight improvement on margins.

The company reported $0.85 in earnings per share for the quarter. Its performance missed analyst expectations. However, if investors are willing to wait, the future could be bright for this company. Walgreen Company (NYSE:WAG) plans on growing revenue by 80.5%, and operating income by 131%, through 2016. The company hopes to do this by rapidly increasing the number of stores it currently operates. It plans to borrow money in order to grow its business.

The company currently has $5.3 billion in debt, but plans to increase that debt to $11 billion in order to sustain higher rates of growth. Because the company has a working business model, I believe that this strategy of borrowing and opening stores will be a success.

Walgreen Company (NYSE:WAG) currently trades at a 14.8 earnings multiple. The multiple is reasonable when considering the 20% to 25% growth rate the company is projecting. Also, Walgreen pays out investors a 2.5% dividend yield, giving income-oriented investors a compelling investment opportunity. Growth-oriented investors could meet a doubling goal by five years. Value investors would be buying this company at a discount relative to growth. Overall, Walgreen Company (NYSE:WAG) is a compelling investment opportunity despite the slight miss on earnings.

Retail at a larger scale

Investors should also consider Wal-Mart Stores, Inc. (NYSE:WMT). The company’s every-day-low-pricing business model will continue to reap rewards for investors over time. The company is expanding its store footprint internationally. The Procter & Gamble Company (NYSE:PG) is projecting the middle class to grow by 1.4 billion people, and of that 98% will come from emerging markets. Wal-Mart Stores, Inc. (NYSE:WMT)’s international segment isn’t the most profitable, but given enough time this will be the company’s segment that will log the upside surprise.

Analysts on a consensus basis anticipate the company to grow earnings by 9.3% on average over the next five years. Wal-Mart Stores, Inc. (NYSE:WMT) trades at a 14.8 earnings multiple and generates a 2.5% dividend yield. The stock trades at a reasonable valuation, because of the historical consistency in the company’s earnings performance.

Page 1 of 2
Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

The 10 Largest Pharmaceutical Companies In the World

The 10 Most Expensive Android Apps

The 9 Most Expensive Designer Bags in the World

The 7 Most Expensive Real Estate in the World

The 10 Most Expensive eBay Items Ever Sold

The 10 Most Expensive iPhone Apps

The 9 Most Expensive Designer Shoes in the World

The 10 Most Expensive Cigarette Brands

The 10 Most Expensive Law Schools in the US

The 10 Best Wall Street Movies

The 10 Most Expensive Golf Clubs Ever Sold

The 10 Most Expensive Golf Memberships

The 10 Best Disney Characters Ever Created

The 8 Best Foods for Gaining Weight

The 10 Most Expensive Colleges in the World

The 7 Most Memorable Ad Campaigns of All Time

The 7 Most Expensive High Schools in the World

The 10 Electric Vehicles with the Longest Range

The 10 Cities with the Worst Drivers in the World

The 10 Most Expensive Dresses Ever Created

10 Islands to Visit Before You Die

10 Famous Celebrities Who Needed Rehab

The 15 Countries with the Largest Oil Reserves

The 10 Most Overused Excuses in the World

The 5 Best iOS Apps You Can’t Get on Android

5 Companies Damaged By Social Media Blunders

The 10 Most Legendary Blues Songs

The 10 Most Lawless Places in the World

4 Reasons China is a Threat to the US

The 17 Most Sugary Drinks in the World

The 10 Most Ruthless Rulers in History

The 10 Greatest Generals in History

Top 8 Travel Destinations for 2015

The 10 Safest Dog Breeds for Children

The 10 Most Stolen Vehicles in the US

The 7 Most Expensive Celebrity Weddings

The 10 Best LoL Teams in the World

Top 10 Worst Marketing Campaigns Ever Produced

Top 5 Diets that Help You Lose Weight

The 10 Best Ways to Stay Awake

7 Artists That Switched Musical Genres

The 10 Most Expensive Cities to Live in New Jersey

The 10 Best High Schools in New York

The 10 Countries With the Least Gender Inequality

The 6 Biggest Musician-Manager Feuds

The 10 Countries with the Cheapest Gas Prices

The 7 Most Theatrical Bands of All Time

The 8 Worst Band Breakups of All Time

The 10 Most Important South American Leaders

The 7 Most Successful Casting Show Winners

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!