A Fresh Look at Walgreens Boots Alliance (WBA) Valuation After S&P Index Removal

If you’re holding shares of Walgreens Boots Alliance (WBA), or eyeing the stock for a potential move, you probably noticed the recent headlines. In a major shakeup, Walgreens Boots Alliance was dropped from several heavyweight S&P indices, including the S&P 500 and the S&P Global 1200. Index removals like these tend to send ripples through the market, triggering turbulence as index funds and other large investors adjust their portfolios. For shareholders, this sort of action is hard to ignore; it is the kind of event that can change the game in both the short and long term.

The news arrived on the heels of a mixed year for Walgreens Boots Alliance. Despite the recent index exits, WBA shares have climbed over 31% during the last year, even after years of declines. Short-term momentum has picked up, with the stock logging a gain of about 6.6% over the past three months. The company has also been navigating settlement of longstanding legal issues and restructuring debt, hinting at ongoing efforts to stabilize operations and reposition for the future. Still, the index removal casts a new light on how the broader market views the stock’s outlook and risks.

So after all this movement and shifting sentiment, the question remains: does Walgreens Boots Alliance now trade at a discount that future growth could unlock, or is the market simply pricing in what is to come?

Most Popular Narrative: Fairly Valued

According to community narrative, Walgreens Boots Alliance is viewed as fairly valued based on the consensus of analysts, who believe the company’s current price accurately reflects its future growth potential and risks.

Walgreens Boots Alliance is optimizing its store footprint by closing underperforming locations. This is expected to lead to a healthier and more profitable store network, positively impacting net margins and reducing costs over time.

Curious about what numbers support this fair value? Analysts are focusing on Walgreens Boots Alliance's future transformation, looking at how the company is renovating operations, aiming to grow profits, and seeking changes in how the market values the business. Find out which projections are driving the case that today's price may be appropriate.

Result: Fair Value of $11.93 (ABOUT RIGHT)

Have a read of the narrative in full and understand what's behind the forecasts.

However, persistent retail challenges and ongoing litigation costs continue to pose major risks. These factors could undermine the case for Walgreens Boots Alliance’s recovery.

Find out about the key risks to this Walgreens Boots Alliance narrative.

Another View: What Does Our DCF Model Suggest?

While analyst price targets signal that Walgreens Boots Alliance is fairly valued, the SWS DCF model arrives at a very different conclusion. This method suggests the stock could be significantly undervalued. Which approach will prove the most accurate as the business evolves?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Walgreens Boots Alliance for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own Walgreens Boots Alliance Narrative

If the analysis above doesn’t fully align with your view, or if you want to dig through the data and draw your own conclusions, you can create a personal narrative in just a few minutes. Do it your way.

A great starting point for your Walgreens Boots Alliance research is our analysis highlighting 3 key rewards and 1 important warning sign that could impact your investment decision.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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