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What to Expect from Walgreens Boots Alliance's 2Q16 Results

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Part 6
What to Expect from Walgreens Boots Alliance's 2Q16 Results PART 6 OF 6

How Do WBA’s Valuations Compare to Peers?

Earnings overview and outlook

Walgreens Boots Alliance’s (WBA) diluted EPS (earnings per share) grew at a CAGR (compounded annual growth rate) of 12.2% from 2010 to 2015 to come in at $3.80 in 2015. The company’s targeted acquisitions and investments have fueled its top-line growth while its focus on increasing operating efficiencies through planned cost reduction has strengthened its bottom line.

As per Wall Street estimates, WBA’s earnings are projected to grow 15% YoY to $4.48 per share in fiscal 2016. The company projects that earnings will be in the range of $4.30 to $4.55 for the current fiscal year. For 2Q16, EPS is predicted to grow by 8.6%, according to analyst estimates.

How Do WBA’s Valuations Compare to Peers?

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Valuations compared to peers

WBA is currently trading at a one-year forward earnings multiple of 17.8x as of March 28, 2016. The company’s valuations have improved after touching a 52-week low of 15.8x in February. The 52-week high stands at 21x.

CVS Health’s (CVS) valuations are similar to those of WBA. Its one-year forward price-to-earnings (or PE) ratio stands at 17.4x though the company has delivered better EPS growth in the past. CVS Heath’s EPS grew by a CAGR of 13.9% between 2010 and 2015 as compared to 12.2% for WBA.

However, WBA has a better earnings forecast than CVS. WBA’s earnings are predicted to grow by 15% in fiscal 2016 and 13% in fiscal 2017. CVS Health’s earnings are predicted to grow 13% in fiscal 2016 and 12% in the following fiscal year.

AmeriSourceBergenis (ABC) and McKesson (MCK) are trading lower than both CVS and WBA. ABC is currently trading at a forward PE of 14.5x while MCK is even cheaper at 12.2x.

ETF investors seeking to add exposure to WBA can consider the Market Vector Retail ETF (RTH), which invests 5% of its portfolio in WBA.

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