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The retail pharmacy industry has evolved in recent years and is expected to continue its strong growth in the future. This should benefit pharmaceutical stocks, CVS Health (CVS) and Walgreens Boots (WBA). But which stock is better to own? Read more here.
CVS Health Corporation (CVS) and Walgreens Boots Alliance, Inc. (WBAs) is one of the largest pharmacy retail chains in the United States and a prominent player in the healthcare sector. I evaluated two of his stocks to determine which one was better for investors. For the reasons explained in this article, I prefer to buy his CVS.
The U.S. retail pharmacy industry has changed significantly over the past few years, with retail chains moving to more omnichannel options and boosting revenue. The US pharmacy market is CAGR 6.3% $861.67 billion by 2028.
In addition, the global e-pharmacy market is expected to grow due to the growing trend of global e-commerce, consumer awareness to buy medicines online, and the availability of medicines not easily found in traditional pharmacies. I’m here.The global e-pharmacy industry is expected to grow CAGR 14.2% Until 2028.
Moreover, the recent shift to personalized medicine, which tailors drugs to an individual’s specific genetic makeup and disease characteristics, has the potential to improve treatment outcomes and reduce healthcare costs.
The global market for personalized medicine is projected to reach a revised size of $740.3 billion by 2030 and grow. CAGR 4.8%Both CVS and WBA are expected to benefit from industry tailwinds.
CVS and WVA have fallen 22.2% and 21.9% over the past nine months. However, while the WBA has risen 1.6% over the past six months, the CVS has fallen 24.3%. CVS closed the last trading session at $73.57 and WBA closed at $32.94.
Here’s why we think CVS will perform better in the near future.
latest development
On March 27, 2023, CVS announced that it expects to complete its acquisition of Signify Health (SGFYMore) on or about March 29, 2023, subject to the satisfaction or waiver of the remaining customary closing conditions set forth in the merger agreement.
The companies will enter into a definitive agreement in September 2022, under which CVS will acquire SGFY for $30.50 per share in cash, for a total transaction value of approximately $8 billion. Upon completion of the acquisition, SGFY will continue its payer-agnostic business as part of CVS Health.
Additionally, on February 8, 2023, CVS announced that it had entered into a definitive agreement to acquire Oak Street Health for approximately $10.6 billion.
Karen S. Lynch, president and CEO of CVS Health, said: People can access and experience more affordable, convenient and connected care. ”
On March 2, WBA announced that DoorDash Inc (dash) and Uber Technologies, Inc (uber). The service is available to eligible patients who are within 15 miles of his Walgreens retail pharmacies, which are participating in thousands nationwide. This should help WBA grow its customer base.
Recent financial results
In the fourth quarter ended December 31, 2022, CVS total revenue increased 9.5% year-over-year to $83.85 billion. The company’s operating profit increased he 62.3% from the same period last year to $3.62 billion.
Net income attributable to CVS was $2.3 billion, up 76.3% from the prior year. Additionally, his adjusted EPS was $1.99, up slightly year over year.
Meanwhile, WBA’s revenue for the first quarter of the fiscal year ended November 30, 2022 was $33.38 billion, down 1.5% year-over-year. Gross profit was $6.95 billion, down 8.2% from the prior year. The company’s operating loss came to $6.15 billion compared to his $1.28 billion operating profit in the same period last year.
In addition, net loss attributable to WBA was $3.72 billion, compared with net income of $3.58 billion in the year-ago quarter.
Past and expected financial performance
CVS revenue has grown at a CAGR of 7.9% over the past three years. Fiscal 2023 revenue is expected to grow 3.1% year-on-year to $332.51 billion. EPS is expected to increase 1.8% year-over-year to $8.84 this year. Exceeded EPS estimates in each of the subsequent four quarters.
WBA’s revenue, on the other hand, has declined slightly over the past three years. Revenue in fiscal 2023 is expected to grow 2.1% year-over-year to $135.42 billion, while EPS is expected to decline 10.6% year-over-year to $4.50. The WBA also beat EPS estimates in each of his last four quarters.
Profitability
CVS’s EBITDA margin of 6.11% is higher than WBA’s 2.83%. CVS’s net profit margin is higher than WBA’s -2.24%. In addition, CVS’s ROCE and ROTA of 5.68% and 1.82%, respectively, outpaced WBA’s minus 12.66% and 3.19, respectively.
However, WBA’s gross margin of 20.91% is higher than CVS’s 16.62%.
evaluation
In terms of forward EV/EBITDA, 7.37x CVS is lower than 10.71x WBA. CVS future EV/EBIT is 8.58x, lower than WBA’s 13.50x. Also, regarding the trailing 12 months, price/cash flowWBA’s 7.87x is higher than CVS’s 7.33x.
So CVS is a good stock here.
POWR rating
CVS has an overall B rating, but it’s the equivalent of our own purchase. POWR rating In the system, WBA has an overall C rating, which translates to Neutral. The POWR Rating is calculated by considering 118 different factors, with each factor being optimally weighted.
CVS is grade A in value. For future non-GAAP P/E, CVS is currently trading at 8.32x, which is 57% below the industry average of 19.33x.Last 12 months EV/EBITDA multiple of 7.62, 48.3% lower than the industry average of 14.74
On the other hand, WBA is rated C in terms of value. WBA’s non-GAAP projected P/E of 7.31x is 60.8% lower than the industry average of 18.65x. The company’s 12-month EV/EBITDA multiple is 17.32, 28.2 percentage points above the industry average of 13.51.
CVS also has a B grade on sentiment, consistent with optimistic analyst expectations. Sentiment’s WBA C grade is in sync with mixed growth expectations.
Out of four B-rated issues Medical – Drugstore CVS ranks first and WBA ranks third in the industry.
In addition to the above, our POWR rating system also rates both CVS and WBA for growth, momentum, stability, and quality.
Get all CVS ratings here. Also click here To see additional POWR ratings for WBA.
winner
The constant demand for pharmaceuticals should help both companies expand and prosper.
However, as discussed above, CVS’ recent acquisition, higher revenue growth potential, and lower valuation make it a better buy than WBA.
Our research shows that investing in stocks with an overall POWR rating of Buy or Strong Buy increases your odds of success.click here Medical – Access the highest rated stocks in the drugstore industry.
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CVS shares traded at $74.15 per share on Tuesday morning, up $0.58 (+0.79%). Since the beginning of the year, CVS has fallen -19.88% against his 4.00% rise in the S&P 500 index over the same period.
About the author: Kritika Sarmah
Her interest in high-risk instruments and passion for writing led Kritika to become an analyst and financial journalist. She has a Bachelor of Commerce degree and currently she is working on the CFA program. With her groundbreaking approach, she aims to help investors identify untapped investment opportunities.
post CVS vs. Walgreens: Which Stocks Are Good to Own? first appeared StockNews.com