Analyzing Walgreens Boots Alliance’s Return on Investments



A look at Walgreens Boots Alliance’s return on investments

In this section, we’ll look at two of the most important metrics used to gauge investors’ returns on their investments. These are ROA (return on assets) and ROE (return on equity).

ROA measures how efficiently management is using a company’s assets. It compares the profitability of a company to its assets. In fiscal 2015, Walgreens Boots generated an income of $4.2 billion on a two-year average asset base of $53 billion ($68.7 billion for fiscal 2015 and $37.2 billion for fiscal 2014), which puts its ROA at 7.9%. This is higher than most US healthcare supply chain peers’ ROAs. While CVS Health (CVS) had an ROA of 6.1% during the last reported fiscal, AmerisourceBergen’s (ABC) ROA stood at -0.5% and McKesson’s (MCK) ROA stood at 2.7%.

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Return on equity

ROE measures the net profits earned by equity shareholders as a percentage of equity capital invested. Walgreens Boots’ ROE for fiscal 2015 comes out to 16.3%, arrived at by dividing the net income of $4.2 billion by the two-year average shareholder equity of $26 billion. Walgreens Boots has given consistent returns on its equity, as its average ROE has been above 14% in the last five fiscal years.

Compared with healthcare supply chain peers’ performance, the company’s performance has been decent. CVS Health (CVS) delivered an ROE of ~12.2% during the last reported fiscal year, whereas AmerisourceBergen (ABC) had an ROE of -10.4%. In terms of ROE, Walgreens trailed McKesson (MCK), whose ROE stood at more than 17% during the last reported fiscal year.

Overall, the company’s performance has been quite good, which shows that the management is making efficient use of its equity and assets.

ETF exposure

Walgreens Boots Alliance (WBA), AmerisourceBergen (ABC), McKesson (MCK), and CVS Health (CVS) are included in the portfolio holdings of the VanEck Vectors Retail ETF (RTH). Together, these companies account for 15.9% of the index weight.


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