1. Fin684
SMIF student
recommendation
By:
Ze Shao
Danny Ko
Jorge Noémi

2. walgreens overview
• Walgreens Boots Alliance incorporated September
2nd, 2014
• Operates through 3 segments
• Retail Pharmacy USA
• Retail Pharmacy International
• Pharmaceutical Wholesale
• $116.536 Billion in sales in 2015
• Second-largest drug store in sales after CVS, and
followed by Rite Aid and Wal-Mart

3. Global presence

4. INDUSTRY OVERVIEW
$0.00
$500,000.00
$1,000,000.00
$1,500,000.00
2010 2011 2012 2013 2014 2015
SALES
INDUSTRY TOTAL
$0.00
$10,000.00
$20,000.00
$30,000.00
$40,000.00
2010 2011 2012 2013 2014 2015
NET INCOME
INDUSTRY TOTAL
Year Total
2010 $ 897,371.65
2011 $ 969,601.74
2012
$ 1,032,688.4
8
2013
$ 1,057,163.1
6
2014
$ 1,143,180.9
6
2015
$ 1,173,923.4
2
Year Total
2010 $ 25,210.77
2011 $ 26,017.75
2012 $ 30,396.37
2013 $ 28,706.90
2014 $ 32,182.80
2015 $ 30,575.50

5. Income/Cash Flow
2010 2011 2012 2013 2014 2015
Sales ($$$) $ 69,915.00 $ 73,146.00 $ 70,788.00 $ 74,188.00 $ 84,585.00 $ 116,534.00
Industry Total $ 897,371.65 $ 969,601.74 $ 1,032,688.48 $ 1,057,163.16 $ 1,143,180.96 $ 1,173,923.42
EBIT ($$$) $ 3,986.00 $ 3,962.00 $ 3,407.00 $ 3,764.00 $ 4,152.00 $ 6,052.00
Industry Total $ 44,232.38 $ 45,506.71 $ 50,757.29 $ 49,858.30 $ 53,300.20 $ 51,583.40
Net Income ($$$) $ 2,252.00 $ 2,632.00 $ 2,059.00 $ 2,730.00 $ 3,375.00 $ 3,368.00
Industry Total $ 25,210.77 $ 26,017.75 $ 30,396.37 $ 28,706.90 $ 32,182.80 $ 30,575.50
Cash Flow Operations ($$$) $ 4,032.00 $ 3,408.00 $ 4,414.00 $ 3,739.00 $ 4,993.00 $ 6,412.00
Industry Total $ 43,191.04 $ 45,443.09 $ 47,573.01 $ 47,494.00 $ 56,006.70 $ 54,080.20
$-
$1,000.00
$2,000.00
$3,000.00
$4,000.00
$5,000.00
$6,000.00
$7,000.00
2010 2011 2012 2013 2014 2015
EBIT ($$$) Net Income ($$$) Cash Flow Operations ($$$)

6. Income/Cash Flow
2010 2011 2012 2013 2014
to to to to to
2011 2012 2013 2014 2015 Avg.
year-over-year growth ---------------------------------------------------------- 2010-2015
Sales ($$$) 4.62% -3.22% 4.80% 14.01% 37.77% 10.76%
Industry Total 8.05% 6.51% 2.37% 8.14% 2.69% 5.52%
EBIT ($$$) -0.60% -14.01% 10.48% 10.31% 45.76% 8.71%
Industry Total 2.88% 11.54% -1.77% 6.90% -3.22% 3.12%
Net Income ($$$) 16.87% -21.77% 32.59% 23.63% -0.21% 8.38%
Industry Total 3.20% 16.83% -5.56% 12.11% -4.99% 3.93%
CFO ($$$) -15.48% 29.52% -15.29% 33.54% 28.42% 9.72%
Industry Total 5.21% 4.69% -0.17% 17.92% -3.44% 4.60%

7. Operating Performance
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
12.00%
14.00%
16.00%
18.00%
20.00%
2010 2011 2012 2013 2014 2015
ROE Industry avg.

8. Short-term liquidity
status
0.800
0.900
1.000
1.100
1.200
1.300
1.400
1.500
1.600
1.700
1.800
2010 2011 2012 2013 2014 2015
Current Ratio Industry avg.

9. Operating efficiency
0.00x
0.50x
1.00x
1.50x
2.00x
2.50x
3.00x
2010 2011 2012 2013 2014 2015
Asset Turnover Industry avg.

10. Long-term solvency & debt
capacity
0
20
40
60
80
100
120
140
2010 2011 2012 2013 2014 2015
TIE Industry avg.

11. DuPont analysis of ROE
2013 2014 2015
Profit Margin 3.68% 3.99% 2.89%
Asset
Turnover
2.04x 1.56x 1.69x
Total Asset 35,481.00 37,182.00 68,782.00
Total Equity 19,454.00 20,457.00 30,861.00
DuPont 0.137 0.113 0.109

12. Part.3 - Income Statement
& EPS FY’2017
Yearly "share" -----------> 7.162% 6.616% 6.451% 6.424% 8.132% 9.000%
Industry Revenues ---------------------> 1007905.896 1082643.321 1119416.923 1189246.742 1271986.425 1387795.052
2011 2012 2013 2014 2015FY 2017
Total Rev $72,184.00 $71,633.00 $72,217.00 $76,392.00 $103,444.00 $ 124,901.55
COGS $50,603.00 $50,125.00 $49,815.00 $53,507.00 $76,520.00 $ 91,901.17
Depreciation And Amort $1,086.00 $1,166.00 $1,283.00 $1,316.00 $1,742.00 $ 1,775.00
Total COGS $51,689.00 $51,291.00 $51,098.00 $54,823.00 $78,262.00 $ 93,676.17
GROSS PROFIT $20,495.00 $20,342.00 $21,119.00 $21,569.00 $25,182.00 $ 31,225.39
SGA, Operating Expenses $16,391.00 $16,762.00 $17,396.00 $17,783.00 $20,348.00 $ 23,731.30
OPERATING INCOME $4,104.00 $3,580.00 $3,723.00 $3,786.00 $4,834.00 $ 7,494.09
NET INCOME $2,714.00 $2,127.00 $2,450.00 $1,932.00 $4,220.00 $ 5,260.86
Wgt Avg Diluted Shares 924.5 880.1 955.2 965.2 1053.9 1,100.00
EPS $2.94 $2.42 $2.56 $2.00 $4.00 $4.78

13. Comparable
companies Ad factor Forecast P/E
Estimated
Price
Jean Coutu Group A 1.44x 17.99 84.42
Rite-Aid 1.34x 27.68 120.56
Vitamin Shoppe 1.10x 12.53 44.79
Target 1.25x 14.84 60.46
Whole Foods Market 0.60x 18.24 35.50
GNC A 1.37x 10.15 45.20
CVS Health 1.17x 16.08 61.11
McKesson 0.94x 13.46 41.26
Wal-Mart 1.46x 16.10 76.24
Kroger 1.25x 15.46 62.58
Costco 0.85x 24.96 68.96
Estimated EPS for WBA in 2017: $4.78
Average Estimated Price: 93.70
Relative valuation:
p/e

14. Comparable
Companies Ad factor
Forecasting
EV/EBIT Estimated EV
Jean Coutu Group
A 1.12 12.45x 104156.21
Rite-Aid 1.25
Vitamin Shoppe 1.50 8.04x 90342.83
Target 1.08 11.10x 89881.50
Whole Foods
Market 0.75 11.41x 63804.48
GNC A 1.50 8.86x 99573.54
CVS Health 1.19 11.78x 105208.74
McKesson 1.16
Wal-Mart 1.33 11.74x 116551.23
Kroger 1.20 11.62537 104942.37
Costco 0.88 16.1343 106452.55
INDUSTRY 1.05 12.34502 97409.29
Relative valuation:
ev/ebit
Forecasted EBIT = $7494.09

15. AVERAGE(TOTAL) 97832.27
AVERAGE(WITHOUT WFM) 101613.14
Net Debt 10406.00
Preferred Equity 0.00
Minority Interest 412.00
Market value of common
equity 90795.14
total share outstanding
1,100.00
Price $82.54
valuation

16. Cost of equity(CRP Approach)30years 8.360
Cost of equity(Average Market Premium
Approach)30years 9.273
Aug '05 Aug '06 Aug '07 Aug '08 Aug '09 Aug '10 Aug '11 Aug '12 Aug '13 Aug '14 Aug '15 Aug '16 Aug '17 Aug '18 Aug '19 Aug '20 Aug '21
Dividends
per Share 0.223 0.273 0.328 0.398 0.475 0.588 0.750 0.950 1.140 1.283 1.373 1.465 1.566 1.848 2.181 2.573 3.036
Growth
Rates of
DPS 22.33% 22.47% 20.18% 21.37% 19.50% 23.68% 27.66% 26.67% 20.00% 12.50% 7.02% 6.73% 6.90% 18.00% 18.00% 18.00% 18.00%
Short-term growth rate: 18%
PV(2016-2021): $8.60
Absolute evaluation

17. Absolute evaluation
Sensitivity analysis:
g 1% 2% 3% 4% 5% 6% 7% 8% 5.72%
Value 36.49 32.59 39.05 48.47 63.50 91.27 159.85 609.15 81.47
Aug '15 Aug '14 Aug '13 Aug '12 Aug '11 Aug '10 Aug '09 Aug '08 Aug '07 Aug '06
Payout ratio 34.31 64.13 44.53 39.26 25.51 27.71 23.51 18.32 16.13 15.84
Return on
Equity (%) 16.45 9.68 12.99 12.84 18.48 14.42 14.63 17.93 19.19 18.42
g 5.64% 6.21% 5.79% 5.04% 4.71% 4.00% 3.44% 3.28% 3.10% 2.92%
Growth Rate= ROE*b= 5.67%
Value(CRP)= 76.47
Value(Average Premium)= 74.05

18. P/E Valuation $ 93.70
EV/EBIT Valuation $ 82.54
Value(CRP) $ 76.43
Value(Average Premium) $ 74.05
Market Value today $ 81.47
Conclusion

19. THANK YOU