Walgreens Boots Alliance, Inc. (WBA) is a pharmacy-led health and beauty retail company that operates through two segments, the United States and International. The company sells prescription drugs and an assortment of retail products.
This month, the company sold shares of AmerisourceBergen Corporation (ABC) through a registered public offering for current proceeds of approximately $1.6 billion. Additionally, WBA entered into a concurrent share repurchase by ABC for proceeds of approximately $250 million. The proceeds are expected to be used for debt paydown and general corporate purposes.
In May, the company announced that it would slash its corporate staff by about 10% due to its focus on streamlining operations and consumer-facing healthcare businesses, as it aims to regain market share by the end of the fiscal year 2023 through greater automation.
Given this backdrop, let’s look at the trends of WBA’s key financial metrics to understand why it could be wise to wait for a better entry point in the stock.
Analyzing Walgreens Boots Alliance's Financial Volatility from 2020 to 2023
The trailing-12-month revenue for WBA has experienced somewhat of a fluctuating trend over the observed time period, which spans from August 2020 to May 2023. Here are some key takeaways:
- In August 2020, the revenue sat at $139.54 billion.
- By November 2020, it had risen slightly to $141.5 billion.
- It then declined comparatively for the next few months until it hit $132.51 billion in August 2021.
- However, there was a slight uptick to $134.97 billion by November 2021.
- Fast forward to the most recent figures in May 2023, the revenue stands at $136.11 billion.
The revenue in May 2023 shows a decrease from the August 2020 figure by approximately -2.46%. Greater emphasis on the more recent data reveals a revenue fluctuation between $132.18 billion (November 2022) and $136.11 billion (May 2023).
This showcases a tenuous and precarious increase in revenue within this recent period. As a result, WBA showcases a revenue trend characterized by minor oscillations, with an overall negative growth rate across the period under review.
Larger fluctuations occurred in the earlier part of this period, while more recent observations show subtler shifts in revenue. Such movements suggest a cautious period of relative stability in the company's financial performance.
The gross margin of WBA shows noticeable fluctuations over the period from August 2020 to May 2023. The series starts at a gross margin value of 20.1% in August 2020 and ends at 19.8% in May 2023. The gross margin value has grown by -2% from the start to the end of the period. Key fluctuations:
- A decrease from 20.1% (August 2020) to 19.7% (November 2020).
- The gross margin increased to 20.2% in May 2021, followed by significant growth to 21.2% by August of the same year.
- It continued its upward trend, peaking at 22.0% in February 2022 before declining.
- By May 2023, it ultimately decreased to 19.8%, which is slightly below the starting value from August 2020.
- More recent data shows that WBA experienced a consistent decline in the gross margin from 21.3% in August 2022 until reaching 19.8% in May 2023.
The Return on Sales (ROS) trend and fluctuations of WBA, over a period of nearly three years from August 2020 to May 2023, are summarized as follows:
- The ROS value remained stagnant at '0' between November 2020 and February 2021, showing no growth or decline.
- A significant increase was observed in May 2021, when the ROS value jumped to 0.026.
- Positive growth continued until February 2022, reaching its peak at a ROS of 0.062. This marks an increase of approximately 6,200% from the initial value recorded in August 2020 (0.01).
- A downward fluctuation commenced after May 2022, hitting 0.035 in August 2022.
- A notable downturn can be observed from November 2022, when the ROS turned negative for the first time at -0.032.
- Continuing this trend, the ROS value further decreased steadily to -0.035 by May 2023.
Considering the direction of the trend, the most recent data indicates a continuous decrease in the company's ROS. As of May 2023, the ROS is at -0.035, suggesting a decline in profitability.
The foremost emphasis should be given to this downturn trend informing any strategic plans or decision-making, especially considering that it diverges from the peak growth recorded in February 2022.
The current ratio of WBA has displayed a fluctuating trend over the observed period from August 2020 to May 2023:
- In August 2020, the current ratio was at 0.67.
- By November 2020, there was an increase in the ratio to 0.69.
- A significant increase was observed by February 2021, when the ratio reached 0.84.
- A slight drop was experienced by May 2021 as the ratio fell to 0.77. However, the ratio kept fluctuating with a downward trajectory till it stood at 0.70 in November 2022.
- From November 2022 to May 2023, a decline was observed as the ratio dropped from 0.70 to 0.63.
Comparing the first value (0.67 in August 2020) to the last value (0.63 in May 2023), WBA's current ratio shows a decline of approximately -6%. In the most recent time points (2023), the ratio remained relatively stable at around the 0.63 point.
While the overall performance of WBA's current ratio is wavering, the more recent stability suggests a consolidation of the company's short-term liquidity situation.
Analyzing Walgreens Boots Alliance's Notable Downward Trend from February-August 2023
The share prices of WBA exhibit a downward trend overall, with some oscillation throughout the assessed period from February 2023 through August 2023. Below are the key points:
- The stock price in February 2023 opens at $36.38 and sees a slight increase to peak at $36.57 on February 17, 2023, before experiencing a dip at the end of the month to $36.08.
- Into March, the stock price continued its downward trajectory from $35.48 at the beginning of the month to a low of $32.90 on March 24. It then rebounded slightly to $34.02 by the end of the month.
- In April 2023, there was a slight resurgence in the mid-month, with the share price rising to $35.75 on April 6. However, it declined to $35.07 by the end of the month.
- A significant dip was observed in May, with the share price dropping from $32.83 to $30.64, marking one of the more significant monthly drops throughout this period.
- June experienced minor upward growth as the stock price moved up slowly from $30.37 to $31.93 before a negligible drop to $31.89 towards the end of the month.
- However, by the end of June, the share price drops significantly to $29.19, marking a downturn in the trade price.
- The months of July and early August experience marginal fluctuations remaining relatively stable within the range from $29.05 to $30.58.
This overall decline suggests a slower growth rate for WBA share price during this period and some volatility in stock price. Depending on individual investor strategies and market predictions, this trend may be seen as a cause for concern or an opportunity for investment at a lower price point. Here is a chart of WBA's price over the past 180 days.
Assessing Growth, Stability, and Value: Walgreens Boots Alliance’s Significant Trends
The POWR Ratings grade of WBA, which is in the Medical - Drug Stores category of stocks, can be summarized as follows:
- The latest POWR grade, as of August 2023, is C (Neutral). This grade has remained consistent over the recent months.
- Within its category, which contains a total of four stocks, WBA holds a rank of #3. This indicates that despite its average POWR grade, the stock has a superior rank than one other stock in its category.
It would be pragmatic for investors and stakeholders to keep an eye on WBA's performance and any changes in its POWR grade or rank within its category in the upcoming weeks and months.
Based on the POWR Ratings for WBA, the three most noteworthy dimensions are Growth, Stability, and Value.
Growth:
- In February 2023, the growth rating was at 53.
- This went up to 63 in March 2023, seeing a significant increment.
- By April 2023, it soared to 86, showcasing a strong upward trend in the company's growth dimension.
- This high mark in growth rating consistently remained near this level in the period from May 2023 to August 2023, hovering around the mid-80s to high-90s range, indicating sustained growth over the period.
Stability:
- The stability rating was quite high and stable over time, starting from 72 in February 2023.
- This rating hovered around the 70s until April 2023, after which it showed a slow but steady decline, dropping to 69 in May, 67 in June, 64 in July, and finally to 63 in August 2023.
Value:
- The value score was 65 in February 2023.
- This rating slightly decreased and then floated around the 60s over the next few months, with a temporary dip to 55 in April 2023, but soon recovered back to 59 in May and June and further improved to 63 in July and 64 in August.
These three dimensions indicate a significant Growth trend, a stable but slowly declining Stability, and a fairly consistent Value rating for WBA.
How does Walgreens Boots Alliance, Inc. (WBA) Stack Up Against its Peers?
Other medical stocks that may be worth considering are CVS Health Corporation (CVS), Electromed, Inc. (ELMD), and AbbVie Inc. (ABBV) - they have better POWR Ratings.
What To Do Next?
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WBA shares were trading at $29.91 per share on Friday afternoon, down $0.40 (-1.32%). Year-to-date, WBA has declined -17.65%, versus a 17.97% rise in the benchmark S&P 500 index during the same period.
About the Author: Anushka Dutta
Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research.
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