Is Walgreen Company (WAG) a Good Stock to Buy?

We can also compare Walgreen Company (NYSE:WAG) to its partner Express Scripts and to Wal-Mart Stores, Inc. (NYSE:WMT), which has been getting into the pharmacy game. Express Scripts’ revenue and net income have been up strongly in percentage terms as its relationship with Walgreen has resumed, and in fact if we annualize recent results its own earnings multiple registers in the low teens. With the sell-side expecting further growth going forward, we think it is well worth consideration as a value stock (we’d note that Express Scripts is quite popular among hedge funds). Wal-Mart has been growing modestly on both top and bottom lines, and its business is quite insensitive to the broader economy with a beta of 0.4. At 16 times trailing earnings, it is cheaper than the pharmacies- though it does have less growth potential- but is valued at a premium to Express Scripts in terms of how well that company has been doing recently.

We think that Walgreen Company (NYSE:WAG) and CVS are both good prospects, but currently the market price is a bit too high for us to recommend buying. It’s best in our view to hold off for now and revisit them once more results come in. The recent financial performance of Express Scripts, however, makes that stock appear to potentially be a good value and so we would be interested in researching that company further.

Disclosure: I own no shares of any stocks mentioned in this article.