hi i'm jimmy in this video we're looking
at the walgreens boots alliance ticker
symbol wba now this video is part of our
newly updated series where we're
analyzing all 30 companies in the dow
jones industrial average we're going to
see if we can identify which ones look
like the best value opportunities the
best growth opportunities and the best
dividend opportunities we've already
completed two of the companies on this
list so far we're working on walgreens
today and we'll just continue plowing
through all of the companies until we
get through all 30 companies now we are
gradually updating our fair value
calculations for each of these stocks
okay so we're going to start quickly
with walgreens business then we're going
to jump into some recent developments
for walgreens company and then we're
going to try to come up with a fair
value for walgreens stock so we could
see that walgreens breaks their business
into two primary segments both the
united states and internationally now
the united states dominates from a
revenue perspective in 2021 they put up
about 85 percent of revenue
but they actually break this down a bit
further and we could see that the
pharmacy business accounts for about 64
of their total business then within
their retail stores in the united states
well that's about 20 of their business
then they have international wholesale
international retail and international
pharmacy now a decent amount of their
international exposure is coming from an
acquisition that they made a few years
ago of the boots company that is when
they became the walgreens boots alliance
and boots is essentially uh a pharmacy
over in europe i think it's primarily in
the united kingdom
but they are some of their international
business is coming from other parts of
europe okay now that's the framework for
how they set up their business now let's
look at some of their underlying
business developments because i actually
think this is one of the more
interesting parts of walgreens today so
when we look at some of their business
developments well recently walgreens has
been pushing what they're calling
walgreens health they're opening some
individual stores i think they're
expected to have a hundred walgreens
health locations by the end of this year
but they've also made some big
acquisitions and some sales of their
businesses so they recently announced an
acquisition of village md
now they made a investment i think they
own about 66 percent of that company
they they are their primary investor
they're the primary owner of that
company they also bought carecentrics
that uh where the village md's does more
clinics they have uh sort of a smaller
medical clinics
carecentrics is more of a at home
service and then they brought innovation
associates that is more around the
technology behind the healthcare
industry software things along those
lines then they also sold their alliance
healthcare business which they acquired
a few years back but then they recently
sold to help pay off debt and for them
to more focus on their walgreens health
that line of their business now their
goal they their stated goal i got this
out of the annual report and from what
management has said well their state of
goal is to become a leading local
clinical service provider so picture
things like urgent care in the united
states where perhaps you have an injury
you you know you feel sick you need a
physical you go to an urgent care place
as opposed to going to something like
the hospital in theory this is faster
and more cost effective or you have
surgery and instead of doing instead of
having to go to some location where it
could be more expensive you could use
their product their care centrics
business and do so at least some of that
at home again hopefully more cost
efficient now i'm actually a big fan of
the changes that walgreens make into
their business i love the idea of
focusing on the health side and
expanding their their potential revenue
footprint into that now there is some
added costs as they acquire these
companies that pay off some debt they
roll these companies into their business
that's going to take a little bit bit of
time and likely put pressure in the
short term over the next couple years
it's likely to put pressure on margins
but in time if they can pull this off
this potentially could be a
differentiator between something like
them and cvs now that's being said let's
jump into some of the numbers so this is
a chart of walgreens revenue going back
to 2005
and i think that this is a few important
points here first back in 2010 well this
is when walgreens acquired droin read
dwayne reed is big and i know i live in
new jersey i'm just outside of new york
city dwayne reed is everywhere in new
york city it's a pharmacy like cvs right
then if we fast forward to 2014 well
that's when they acquired boots boots
you can see there's a big jump in
revenue that happened at that same time
fast forward even further well
walgreens actually attempted to buy rite
aid another pharmacy company and the
deal fell through for acquiring all of
reddit but they did pick up almost 2 000
stores individual rite aid stores so
again that added to some of their
overall growth
then we had 2021 2020 happen obviously a
lot went down with covet hurt a lot of
companies then fast forward just
recently well this is where they
announced the sale of their alliance
healthcare business
and
this ultimately they said that they're
using the cash generated in this sale i
think they're picking up about six
billion dollars or so paying off some
debt that they had but also applying
some of that cash generation into
growing the business and focusing on
their walgreens health that being said
now let's jump over to coming up with
the fair value for walgreens stock so
using our discounted cash flow
calculator again a link in the
description below if you want to sign up
to get access to this well when we're
using the company's own weight average
cost of capital well we get a fair value
of about 86 bucks per share now they
have a low cost of capital as you would
expect with a somewhat defensive stock
like a walgreens or a cvs their cost of
capital is coming in at about six and a
half percent well the stock looks very
undervalued now using seven and a half
percent which again i got because i'm
using a premium over corporate bonds
that's how i came up with my required
rate of return well using that we get a
fair value of about 59 bucks per share
now that being said it's also important
to point out that walgreens pays a
decent dividend a bit over four percent
at this current price of about 44 45
bucks per share so overall it looks like
walgreens is a potential contender as
both a decent value stock and a decent
dividend stock so in the early signs of
our dial 30 analysis it looks like
walgreens could look pretty good now if
you'd like to get access to this website
again i will leave a link in the
description below a link right here and
then down here i've got a video that i
did on how to analyze a company so if
you're curious how to go through the
entire research process how to come up
with the fair value all of that stuff
well again again i did a more lengthy
video on that right here thank you so
much for sticking with me all the way to
the end of the video i really do
appreciate it thanks and i'll see you in
the next video