As the world's third-richest person and most celebrated investor, Warren Buffett attracts a lot of attention. Thousands try to glean what they can from his thinking processes and track his investments.

We can't know for sure whether Buffett is about to buy Walgreen (NYSE: WAG) -- he hasn't specifically mentioned anything about it to me -- but we can discover whether it's the sort of stock that might interest him. Answering that question could also reveal whether it's a stock that should interest us. In this series, we do just that.

Writing in a recent 10-K, Buffett lays out the qualities he looks for in an investment. In addition to adequate size, proven management, and a reasonable valuation, he demands:

  1. Consistent earnings power.
  2. Good returns on equity with limited or no debt.
  3. Management in place.
  4. Simple, non-techno-mumbo-jumbo businesses.

Does Walgreen meet Buffett's standards?

1. Earnings power
Buffett is famous for betting on a sure thing. For that reason, he likes to see companies with demonstrated earnings stability.

Let's examine Walgreen's earnings and free cash flow history:

Wag

Source: S&P Capital IQ.

Over the past several years, Walgreen's earnings and free cash flow have held fairly steady.

2. Return on equity and debt
Return on equity is a great metric for measuring both management's effectiveness and the strength of a company's competitive advantage or disadvantage -- a classic Buffett consideration. When considering return on equity, it's important to make sure a company doesn't have an enormous debt burden, because that will skew your calculations and make the company look much more efficient than it is.

Since competitive strength is a comparison between peers, and various industries have different levels of profitability and require different levels of debt, it helps to use an industry context.

Walgreen generates a moderately high return on equity -- 18% over the past year, 17% on average over the past five years -- while employing a modest 16% debt-to-equity ratio.

3. Management
CEO Greg Wasson has been at the job since only early 2009, though he's served in other roles with the company for nearly three decades.

4. Business
Drugstores aren't particularly susceptible to technological disruption.

The Foolish conclusion
So is Walgreen a Buffett stock? It could very well be. The company exhibits many of the quintessential characteristics of a Buffett investment: consistent earnings, high returns on equity with limited debt, reasonably tenured management, and a straightforward business.

If you're curious about another promising retail stock -- one that's changing the face of commerce in Latin America -- I'd also suggest checking out "The Motley Fool's Top Stock for 2012," a special report from The Motley Fool. I invite you to grab a free copy to discover everything you need to know about the stock.