It lets them pool all of their purchasing power, specifically in buying generic drugs. They will go around the world to suppliers and increasingly that is becoming India and Southeast Asia.
Express Scripts is trading at $59.60 per share, with a total market cap of $34 billion. The market values the company at 11.47 times EV/EBITDA. Walgreen has a bit of a lower valuation. At $49 per share, Walgreen is worth nearly $46.4 billion. The market values Walgreen at nearly 11 times EV/EBITDA. AmerisourceBergen has the lowest valuation of the trio. The company is trading at $54.20 per share, with a total market cap of $12.40 billion. It is valued at only 8.83 times EV/EBITDA. Income investors might like Walgreen the most with its highest dividend yield at 2.2%. While AmerisourceBergen offers investors dividend yield at 1.6%, Express Scripts Holding Company (NASDAQ:ESRX) does not pay any dividends.
My Foolish take
With their market leading position, all of those three companies could fit well in the long-term healthcare portfolio of patient investors. I like AmerisourceBergen the most with its lowest valuation and the decent dividends. Furthermore, the agreement with Walgreen could benefit both companies with their generic drug purchasing power.
The article Playing the Pharmaceutical Distribution Stocks originally appeared on Fool.com and is written by Anh Hoang.
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