Long-established in the Healthcare Providers & Services industry, Walgreens Boots Alliance Inc (WBA, Financial) has enjoyed a stellar reputation. It has recently witnessed a daily gain of 1.88%, juxtaposed with a three-month change of 7.81%. However, fresh insights from the GF Score hint at potential headwinds. Notably, its diminished rankings in financial strength, growth, and valuation suggest that the company might not live up to its historical performance. Join us as we dive deep into these pivotal metrics to unravel the evolving narrative of Walgreens Boots Alliance Inc.
What Is the GF Score?
The GF Score is a stock performance ranking system developed by GuruFocus using five aspects of valuation, which has been found to be closely correlated to the long-term performances of stocks by backtesting from 2006 to 2021. The stocks with a higher GF Score generally generate higher returns than those with a lower GF Score. Therefore, when picking stocks, investors should invest in companies with high GF Scores. The GF Score ranges from 0 to 100, with 100 as the highest rank.
- Financial strength rank: 4/10
- Profitability rank: 7/10
- Growth rank: 3/10
- GF Value rank: 8/10
- Momentum rank: 2/10
Based on the above method, GuruFocus assigned Walgreens Boots Alliance Inc a GF Score of 68 out of 100, which signals poor future outperformance potential.
Understanding Walgreens Boots Alliance Inc's Business
Walgreens Boots Alliance Inc, with a market cap of $20.38 billion and sales of $139.08 billion, is one of the largest retail pharmacy chains in the U.S., boasting over 8,500 locations. Nearly three-quarters of Americans live within five miles of a Walgreens location. Prescription drug sales, which make up 20% of total prescription revenue in the U.S., generate roughly two-thirds of the company's revenue. Walgreens also earns from retail products, European drug wholesale, and healthcare. With more locations incorporating services like Health Corner and Village Medical, Walgreens is creating an omnichannel experience and positioning itself as a comprehensive healthcare provider.
Financial Strength Breakdown
Walgreens Boots Alliance Inc's financial strength indicators present some concerning insights about the company's balance sheet health. The company's interest coverage ratio of 0 positions it worse than 0% of 396 companies in the Healthcare Providers & Services industry. This ratio highlights potential challenges the company might face when handling its interest expenses on outstanding debt. The esteemed investor Benjamin Graham typically favored companies with an interest coverage ratio of at least five.
The company's Altman Z-Score is just 1.82, which is below the safe threshold of 2.99. Although this does not imply immediate danger of financial distress, the stock may face some financial struggles if the Altman Z-score drops below 1.81. Additionally, the company's low cash-to-debt ratio at 0.02 indicates a struggle in handling existing debt levels.
Growth Prospects
A lack of significant growth is another area where Walgreens Boots Alliance Inc seems to falter, as evidenced by the company's low Growth rank. The company's predictability rank is just one star out of five, adding to investor uncertainty regarding revenue and earnings consistency.
Next Steps
Considering Walgreens Boots Alliance Inc's financial strength, profitability, and growth metrics, the GF Score highlights the firm's unparalleled position for potential underperformance. Investors should weigh these factors carefully when evaluating the company's future prospects. For those seeking more robust investment opportunities, GuruFocus Premium members can explore companies with strong GF Scores using the following screener link: GF Score Screen.
This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
