Walgreen Company (WAG), CVS Caremark Corporation (CVS): OTCs & Then Some

Page 2 of 2

Building a brand

Companies that sell over-the-counter medication may have benefited from the sluggish economy because of their ability to sell a generic, store brand version of just about everything. Beyond health and wellness items, the same can now apply to grocery items at Walgreen with the marketing of it’s own brand, Nice!. Nearly every grocery establishment, including competitor CVS Caremark Corporation (NYSE:CVS), has its own premium brand, but even on a light wallet people want quality.

Taking a nod from the time-tested convenience store model, Walgreen has begun to offer a cafe environment in its urban stores. Starting with its Duane Reade locations in New York City, Upmarket offers fresh sandwiches, produce, and a wide selection of beverages. It might sound more like a quick-stop than a drugstore, but Upmarket still fits the Walgreen mission, focused on beauty, health, and convenience.

Brand development has paid off for Walgreen Company (NYSE:WAG), trading at a premium P/E of 22 compared to that of CVS Caremark Corporation (NYSE:CVS) at just over 18. Neither stock is a steal, but because of this heavy investment in healthcare, it shouldn’t be a surprise. However, with CVS being a much larger company in terms of market cap and sales, the dividend of about 1.5% isn’t too attractive. CVS Caremark Corporation (NYSE:CVS) has less debt and higher cash flow, but company investments and growth appear to be lagging behind the competition, at least in the public eye. The late aggressive growth of Walgreen may spur CVS Caremark Corporation (NYSE:CVS) to follow suit, awarding any investors in either company for the long haul.

With key and numerous locations for commuters and travelers, Walgreen Company (NYSE:WAG) looks to capture loyalty in more areas than allergy relief. The company is building a gradual, strong foundation that will withstand market swings and likely lead to future increases of its 2.3% dividend. Walgreen’s path is attractive for the long-term investor.

The article OTCs and then Some originally appeared on Fool.com and is written by Kyle Vaughan.

Kyle Vaughan has no position in any stocks mentioned. The Motley Fool recommends Express Scripts. The Motley Fool owns shares of Express Scripts. Kyle is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

Page 2 of 2