Shares of Walgreen
How it got here
It's been an up and down year to say the least for Walgreen. The company got into a tiff with Express Scripts
While Walgreen was negotiating with Express Scripts, CVS was busy taking its customers. The rival chain expects to keep 50% of the business it won during the impasse, and that's helped push CVS's stock up even faster than Walgreen.
At least the stock hasn't been a decliner like one of the company's competitors. Over the past five years, Walgreen and CVS have both outperformed Rite Aid
Source: Yahoo! Finance.
This table also shows what little difference there is between Walgreen and CVS, except the dispute over Express Scripts.
CVS has clearly been the winner of these two over the past year, but can Walgreen catch up? I think there are reasons to think it can.
CVS is trading at a higher earnings multiple on both a trailing and forward basis. It also pays a lower dividend than Walgreen does. As Walgreen wins back Express Scripts customers and its stake in Alliance Boots begins to add to earnings, I think the results will turn around.
The pharmaceutical business is fairly stable, and an attractive dividend and relatively low valuation will help Walgreen. The stock hasn't gone anywhere for the past five years, but I think there's double-digit upside as the company reduces acquisition costs and returns to more steady-state operations.
Fool contributor Travis Hoium has no position in any company mentioned. You can follow Travis on Twitter at @FlushDrawFool, check out his personal stock holdings, or follow his CAPS picks at TMFFlushDraw.
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