Business Analysis: The Current Market Value Of Walgreens

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Current Market Conditions Paper
To analyze the current market value of the company Walgreen there are other topics that need to be addressed such as is included in this report. They are as follows:
Market Structure
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The Company's Website, www.walgreens.com, provides service and information to Internet customers. The Company expects to open 500 new stores in fiscal
2001 and have a total of 6,000 drugstores by the year 2010. The drugstores are engaged in the retail sale of prescription and non-prescription drugs, and carry additional product lines such as general merchandise, cosmetics, toiletries, household items, food and beverages. Customer prescription purchases can be made at the drugstores as well as through the mail, telephone and the Internet
For the nine months ended 5/01, sales rose 16% to $18.34 billion. Net income rose 19% to $668.7 million. Revenues reflect higher comparable store sales and the opening of new stores. Net income also reflects lower headquarters and advertising expenses and a $22.1 million litigation settlement gain.
Price elasticity of demand
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These competitors are store chains having pharmacies as retailers such as Wal-Mart, etc. Walgreen's pricing along with convenience has to exceed the other competitors offer. Consensus is calling for a 5-year growth rate of 22% per year on average. However, due to the extremely favorable trends that are developing in this industry, I am assuming a growth rate of 25%. As the graph above shows, the company has exhibited strong earnings growth and should continue to do so as favorable demographics increase, competition decreases and the industry infrastructure defends the gross margins. Based on the plowback ratio and a growth rate that will decline to GDP plus inflation, I calculated a per share equity value of $33.44. The Price/Value is .97, which indicates slight upside potential. www.WalgreenCompanyAnalysisMBAD6194-Spring2006

EPS 0.85 1.01 1.20 1.51 1.86 2.28 2.74 3.25 3.80 4.38 4.98 5.56 6.13 6.64 7.09 7.44 7.69
Net New Equity Investments 0.72 0.86 1.02 1.28 1.58 1.88 2.21 2.55 2.90 3.24 3.57 3.87 4.12 4.32 4.46 4.51 4.49
FCFE 0.13 0.15 0.18 0.23 0.28 0.39 0.53 0.70 0.91 1.14 1.41 1.70 2.00 2.32 2.63 2.93

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