AmerisourceBergen (ABC) versus Walgreens Boots Alliance (WBA) Financial Analysis

AmerisourceBergen (NYSE: ABC) and Walgreens Boots Alliance (NASDAQ:WBA) are both large-cap medical companies, but which is the better business? We will contrast the two companies based on the strength of their earnings, institutional ownership, dividends, analyst recommendations, profitability, valuation and risk.

Analyst Ratings

This is a summary of recent recommendations and price targets for AmerisourceBergen and Walgreens Boots Alliance, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
AmerisourceBergen 0 5 7 0 2.58
Walgreens Boots Alliance 0 8 12 0 2.60

AmerisourceBergen presently has a consensus price target of $93.40, suggesting a potential upside of 1.08%. Walgreens Boots Alliance has a consensus price target of $85.94, suggesting a potential upside of 18.46%. Given Walgreens Boots Alliance’s stronger consensus rating and higher possible upside, analysts clearly believe Walgreens Boots Alliance is more favorable than AmerisourceBergen.

Institutional and Insider Ownership

67.9% of AmerisourceBergen shares are held by institutional investors. Comparatively, 61.4% of Walgreens Boots Alliance shares are held by institutional investors. 27.4% of AmerisourceBergen shares are held by company insiders. Comparatively, 14.8% of Walgreens Boots Alliance shares are held by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company is poised for long-term growth.

Dividends

AmerisourceBergen pays an annual dividend of $1.52 per share and has a dividend yield of 1.6%. Walgreens Boots Alliance pays an annual dividend of $1.60 per share and has a dividend yield of 2.2%. AmerisourceBergen pays out 82.2% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Walgreens Boots Alliance pays out 42.3% of its earnings in the form of a dividend. AmerisourceBergen has increased its dividend for 12 consecutive years. Walgreens Boots Alliance is clearly the better dividend stock, given its higher yield and lower payout ratio.

Profitability

This table compares AmerisourceBergen and Walgreens Boots Alliance’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
AmerisourceBergen 0.27% 56.29% 3.77%
Walgreens Boots Alliance 3.45% 18.36% 7.73%

Valuation & Earnings

This table compares AmerisourceBergen and Walgreens Boots Alliance’s top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
AmerisourceBergen $153.14 billion 0.13 $364.48 million $1.85 49.95
Walgreens Boots Alliance $118.21 billion 0.61 $4.08 billion $3.78 19.19

Walgreens Boots Alliance has lower revenue, but higher earnings than AmerisourceBergen. Walgreens Boots Alliance is trading at a lower price-to-earnings ratio than AmerisourceBergen, indicating that it is currently the more affordable of the two stocks.

Risk and Volatility

AmerisourceBergen has a beta of 1, meaning that its share price has a similar volatility profile to the S&P 500.Comparatively, Walgreens Boots Alliance has a beta of 1.22, meaning that its share price is 22% more volatile than the S&P 500.

Summary

Walgreens Boots Alliance beats AmerisourceBergen on 11 of the 17 factors compared between the two stocks.

AmerisourceBergen Company Profile

AmerisourceBergen Corporation is a pharmaceutical sourcing and distribution services company. The Company’s segments include Pharmaceutical Distribution and Other. The Company provides services to healthcare providers, and pharmaceutical and biotech manufacturers. As of June 30, 2016, the Pharmaceutical Distribution segment consists of two operating segments, including the operations of AmerisourceBergen Drug Corporation (ABDC) and AmerisourceBergen Specialty Group (ABSG), which distributes specialty drugs to their customers. Servicing healthcare providers in the pharmaceutical supply channel, the Pharmaceutical Distribution segment’s operations provide drug distribution and related services. The Other segment consists of the operations of various segments, including the AmerisourceBergen Consulting Services (ABCS), the World Courier Group, Inc. and the MWI Veterinary Supply, Inc. ABSG operates distribution facilities that focus primarily on complex disease treatment regimens.

Walgreens Boots Alliance Company Profile

Walgreens Boots Alliance, Inc. (Walgreens Boots Alliance) is a holding company. The Company is a global pharmacy-led, health and wellbeing enterprise. Walgreens Boots Alliance operates through three divisions, including Retail Pharmacy USA, Retail Pharmacy International and Pharmaceutical Wholesale. The Company’s products are marketed under a number of brands, which include No7, the Botanics range, Almus (generic medicines), Boots Pharmaceuticals and Soap & Glory (bathing and beauty brand). In addition, the Company has investments in Guangzhou Pharmaceuticals Corporation and Nanjing Pharmaceutical Company Limited. The Company operates in around 25 countries, which include the wholesale and distribution network with over 340 distribution centers and more than 180,000 pharmacies, health centers and hospitals in 19 countries.

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