Growth expectations for Walgreens Boots Alliance Inc (NASDAQ:WBA) are high, but many investors are starting to ask whether its last close at $64.11 can still be rationalized by the future potential. Let’s take a look at some key metrics to determine whether there’s any value here for current and potential future investors. View our latest analysis for Walgreens Boots Alliance
How is WBA going to perform in the future?According to the analysts covering the company, the following few years should bring about good growth prospects for Walgreens Boots Alliance. Expectations from 23 analysts are bullish with earnings per share estimated to rise from today’s level of $4.004 to $7.348 over the next three years. This indicates an estimated earnings growth rate of 11.52% per year, on average, which illustrates an optimistic outlook in the near term.
Is WBA’s share price justified by its earnings growth?
Walgreens Boots Alliance is available at a price-to-earnings ratio of 16.01x, showing us it is undervalued relative to the current US market average of 18.25x , and undervalued based on its latest annual earnings update compared to the consumer retailing average of 21.02x .
Walgreens Boots Alliance’s price-to-earnings ratio stands at 16.01x, which is low, relative to the industry average. This already suggests that the stock could be undervalued. But, since Walgreens Boots Alliance is a high-growth stock, we must also account for its earnings growth by using calculation called the PEG ratio. A PE ratio of 16.01x and expected year-on-year earnings growth of 11.52% give Walgreens Boots Alliance a higher PEG ratio of 1.39x. This means that, when we account for Walgreens Boots Alliance’s growth, the stock can be viewed as slightly overvalued , based on fundamental analysis.
What this means for you:
WBA’s current overvaluation could signal a potential selling opportunity to reduce your exposure to the stock, or it you’re a potential investor, now may not be the right time to buy. However, basing your investment decision off one metric alone is certainly not sufficient. There are many things I have not taken into account in this article and the PEG ratio is very one-dimensional. If you have not done so already, I urge you to complete your research by taking a look at the following:
- Financial Health: Is WBA’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
- Past Track Record: Has WBA been consistently performing well irrespective of the ups and downs in the market? Go into more detail in the past performance analysis and take a look at the free visual representations of WBA’s historicals for more clarity.
- Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.