Long-established in the Healthcare Providers & Services industry, Walgreens Boots Alliance Inc (WBA, Financial) has enjoyed a stellar reputation. However, it has recently witnessed a daily loss of 0.55%, juxtaposed with a three-month change of 0.48%. 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: 6/10
- Growth rank: 4/10
- GF Value rank: 2/10
- Momentum rank: 2/10
Based on the above method, GuruFocus assigned Walgreens Boots Alliance Inc the GF Score of 60 out of 100, which signals poor future outperformance potential.
Understanding Walgreens Boots Alliance Inc Business
Walgreens Boots Alliance Inc is one of the largest retail pharmacy chains in the US, with over 8,000 locations. Nearly three-quarters of Americans live within five miles of a Walgreens location. Roughly two-thirds of revenue is generated from prescription drug sales; Walgreens makes up 20% of total prescription revenue in the US. Walgreens also generates sales from retail products (general wellness consumables and its own branded merchandise), European drug wholesale, and healthcare. With more locations incorporating additional services like Health Corner and Village Medical, Walgreens creates an omnichannel experience for patients and positions itself as a one-stop healthcare provider.
Financial Strength Breakdown
Walgreens Boots Alliance Inc's financial strength indicators present some concerning insights about the company's balance sheet health. Walgreens Boots Alliance Inc has an interest coverage ratio of 0, which positions it worse than 0% of 419 companies in the Healthcare Providers & Services industry. This ratio highlights potential challenges the company might face when handling its interest expenses on outstanding debt. It's worth noting that 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 1.61, which is below the distress zone of 1.81. This suggests that the company may face financial distress over the next few years. Additionally, the company's low cash-to-debt ratio at 0.1 indicates a struggle in handling existing debt levels. The company's debt-to-equity ratio is 3.15, which is worse than 94.56% of 551 companies in the Healthcare Providers & Services industry. A high debt-to-equity ratio suggests over-reliance on borrowing and vulnerability to market fluctuations.
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. Lastly, Walgreens Boots Alliance Inc predictability rank is just one star out of five, adding to investor uncertainty regarding revenue and earnings consistency.
Conclusion
In conclusion, the financial strength, profitability, and growth metrics of Walgreens Boots Alliance Inc, as highlighted by the GF Score, underscore the firm's potential for underperformance. The company's high debt levels, low growth prospects, and financial distress indicators suggest that it may face significant challenges in the future. Investors should carefully consider these factors when evaluating the potential of Walgreens Boots Alliance Inc as an investment opportunity. For those seeking companies with strong GF Scores, GuruFocus Premium members can explore more options 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.
