Stock Analysis

What Type Of Returns Would Walgreens Boots Alliance's(NASDAQ:WBA) Shareholders Have Earned If They Purchased Their SharesFive Years Ago?

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NasdaqGS:WBA
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While it may not be enough for some shareholders, we think it is good to see the Walgreens Boots Alliance, Inc. (NASDAQ:WBA) share price up 11% in a single quarter. But over the last half decade, the stock has not performed well. You would have done a lot better buying an index fund, since the stock has dropped 42% in that half decade.

Check out our latest analysis for Walgreens Boots Alliance

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

In the last half decade Walgreens Boots Alliance saw its share price fall as its EPS declined below zero. This was, in part, due to extraordinary items impacting earnings. At present it's hard to make valid comparisons between EPS and the share price. But we would generally expect a lower price, given the situation.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

earnings-per-share-growth
NasdaqGS:WBA Earnings Per Share Growth March 4th 2021

Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, Walgreens Boots Alliance's TSR for the last 5 years was -33%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

Walgreens Boots Alliance shareholders gained a total return of 2.2% during the year. But that return falls short of the market. On the bright side, that's still a gain, and it is certainly better than the yearly loss of about 6% endured over half a decade. So this might be a sign the business has turned its fortunes around. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Like risks, for instance. Every company has them, and we've spotted 2 warning signs for Walgreens Boots Alliance (of which 1 is concerning!) you should know about.

But note: Walgreens Boots Alliance may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.

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