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Is Walgreens Boots Alliance a million-dollar manufacturer?


Walgreens Boot Alliance (NASDAQ: AMB) is a well-known name in the healthcare industry. Consumers in the United States and around the world have frequented their neighborhood pharmacies for generations.

However, the company has fallen on difficult times. Clumsy efforts to expand the business ruined the balance sheet and caused a 90% drop from the stock’s peak.

Recovery efforts have begun. Management is trimming debt from the balance sheet and there are hopes for an eventual return to earnings growth. Investors are looking at a beaten stock with an 11% dividend yield today that could be a big winner, maybe a millionaire manufacturer if Walgreens recovers.

But is that likely? Or has the industry overlooked Walgreens?

Walgreens Boots Alliance is one of the largest pharmaceutical companies in the world. Ironically, the prescription drugs consumers take to a Walgreens store (Boots in the UK) are simply the carrot to get them in the door. Pharmacies work on razor-thin margins and make most of their profits by selling retail products, food and drinks while customers visit the stores. Walgreens generated nearly $116 billion in revenue at its U.S. pharmacies in 2024, but only made $2.1 billion in operating income, a 1.5% margin.

Competition from new sources, such as threats from mail order and e-commerce, has pressured traditional pharmacies to expand their business model. For example, CVS Health acquired health insurance giant Aetna in 2018. Walgreens opted to expand into care services, a costly and acquisition-heavy endeavor that finally increased its costs and its balance sheet.

Now, the company is aggressively trimming fat. Management is deleveraging the balance sheet and cutting costs by closing its least profitable stores:

Walgreens Boots Alliance Cost Reduction Agenda.
Data source: Walgreens Boots Alliance.

The worst could happen soon. Walgreens earned $2.88 per share in 2024 and was on track to decline in earnings in 2025 to $1.40 on the low end. However, analysts estimate that the company will grow its earnings by an average of 5% annually over the next three to five years, indicating a minimal touch and a return to earnings growth.

Assuming Walgreens grows profits again, the investment thesis It is attractive to the letter.

Walgreens trades with a forward price-to-earnings ratio of about 6 and a PEG ratio of 1.1. In other words, the stock’s valuation is attractive for the company’s expected earnings growth. Hypothetically, investors could expect Walgreens stock to generate investment returns on par with the company’s overall earnings growth and dividend yield, about 16% annualized.



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