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
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

Celebrities Who Believe In Scientology

10 High Margin Food Products to Build a Business Around

The 10 Most Expensive Clothing Stores in the United States to Get Decked Out At

The 5 Biggest Kickstarter Scams That Swindled Backers’ Donations

The 10 Most Expensive Boarding Schools In the World

50 Crazy Facts About Japan You Won’t Believe

Top 10 Least Expensive Hybrid Cars to Save the Planet With

The 10 Biggest ‘Gate’ Controversies in History

The 10 States with the Highest Nursing Shortages Leaving Their Hospitals Depleted

The 10 Best Value Investment Blogs that Every Investor Must Read

The 6 Cheapest Boarding Schools in Europe 2015

The 5 Most Expensive Cars To Insure in the World

The 10 Most Common Genetically Modified Foods

10 Self-Made Billionaires Who Came From Nothing

The 10 Most Expensive Cities to Live in North America

The 13 Most Expensive Headphones in the World to Represent

The Top 20 Wealthiest Soccer Teams in 2014

4 BuzzWorthy Cannabis Stocks And Some Smoking Derivative Plays

The 10 Healthiest Fast Food Chains in America to Dine At

The 5 Most Expensive Cat Food Brands You Can Spoil Your Kitty With

The 6 Best eCommerce Platforms for Small Businesses

The 10 Worst Mistakes an Entrepreneur Can Make

The 5 Most OP Characters in League of Legends to Carry Games and Crush Foes With

The 5 Best Foods to Eat Before Running that Will Help You Pound the Pavement

10 Glaring Plot Holes in The Walking Dead that a Zombie-Filled Bus Could Drive Through

The 5 Biggest Celebrity Stoners Who Love Their Reefer

The 10 Most Overrated Movies Of All Time by Out-of-Touch Critics

Top 6 Least Expensive Cruise Destinations For 2015 that Will Take You to Paradise

10 States with Lowest Substance Abuse Rates in America

The 14 Most Watched TV Finales Ever

The 10 Best Selling Role Playing Games of All Time for PC

10 Most Influential Papers In Economics

Top 8 Biggest Charities in the US

10 Worst Celebrity Career Moves Ever

Top 10 Best Paid Tennis Stars in the World

Top 6 Cities For The Ultra Rich to Live in Comfort

10 Cities with High Demand for Nurses

6 of the Worst Greeting Card Messages Ever Crafted

How to Make Money in ArcheAge and Build Your Empire

10 Foods To Eat To Lower Cholesterol Levels

The 10 Most Hated Television Characters of All Time

The 30 Worst Halloween Costume Ideas Ever Brought to Horrible Life

10 Vocational Skills in Demand Today with Jobs Waiting to be Filled

10 Best Places to Visit in Central and South America

The 10 Greatest Empires in History Which Nearly Conquered the World

The 6 Cheapest Boarding Schools In America 2015

5 Clear Reasons LoL is Better than DotA, Continues to Rule MOBAs

The Only 9 Teams with a Chance to Win the Super Bowl

The 15 Most Common Phobias in America that Induce Fits of Panic

Top 6 Least Expensive Tourist Destinations in 2014

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!