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ROBERT
From today's Bear-ons
Andrew Bary in The Trader column:
'But the chains, especially Walgreen, could be vulnerable if only because of their lofty price/earnings multiples. Walgreen trades at a stunning 53 times the profits projected for its current fiscal year, which ends in August. CVS has a P/E of 36, and Rite Aid, 24, based on expected 1999 profits.
Walgreen shares are up 75% in the past year and have risen tenfold since 1990. Walgreen's ascent reflects its steady 15% annual profit growth, its allure as a demographic play on aging Baby Boomers, and investors' willingness to accord huge P/E multiples to companies with consistent double-digit profit growth.
Walgreen is well-managed. But should it command a higher multiple than all the major drug makers except Pfizer? After all, the top drug outfits have better profit growth, higher margins and less competition.
Walgreen's prescription-drug sales are growing smartly, but the company did warn in its latest 10-Q filing that its margins are under some pressure from rising third-party and mail-order sales'
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That rag has been raining on my parade for a long time, but if it doesn't come from Abelson I do listen a bit. I sold WAG last week because of the huge run. The stock will definitely take a hit Monday due to the above. If you believe in its long term future, tomorrow might be the time to add more. I might re-enter.
The article centered on AMZN getting into the drug retail and the effects that may have on the chains.You should get yourself a copy.
I am concerned about the huge competition. I live in a very rural area and the local town has 4 discount RX on one intersection.
Hope this is helpful. You contribute a ton to this thread.
Can you hear it now? "You've got drugs!"
Peace
Craig |
