Is Walgreens Boots (NASDAQ:WBA) rise justifiable given current volatility?

Considering the 90-days investment horizon, Walgreens Boots is expected to under-perform the market. In addition to that, the company is 1.68 times more volatile than its market benchmark. It trades about -0.1 of its total potential returns per unit of risk. The DOW is currently generating roughly 0.1 per unit of volatility. As many adventurous traders are excited about healthcare space, it is only fair to go over the risk of shorting Walgreens Boots Alliance based on its current volatility spike. We will evaluate if the latest Walgreens Boots price volatility suggests a bounce in November. Walgreens Boots' very low volatility may have no significant impact on the stock's value as we estimate Walgreens Boots as currently fairly valued. The real value, based on our calculations, is getting close to 37.47 per share.
Published over a year ago
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Reviewed by Gabriel Shpitalnik

Walgreens Boots Alliance has roughly 777 M in cash with 5.78 B of positive cash flow from operations. This results in cash-per-share (CPS) ratio of 0.9.
Volatility is a rate at which the price of Walgreens Boots or any other equity instrument increases or decreases for a given set of returns. It is measured by calculating the standard deviation of the annualized returns over a given period of time and shows the range to which the price of Walgreens Boots may increase or decrease. In other words, similar to Walgreens's beta indicator, it measures the risk of Walgreens Boots and helps estimate the fluctuations that may happen in a short period of time. So if prices of Walgreens Boots fluctuate rapidly in a short time span, it is termed to have high volatility, and if it swings slowly in a more extended period, it is understood to have low volatility. Please read more on our technical analysis page.

How important is Walgreens Boots's Liquidity

Walgreens Boots financial leverage refers to using borrowed capital as a funding source to finance Walgreens Boots Alliance ongoing operations. It is usually used to expand the firm's asset base and generate returns on borrowed capital. Walgreens Boots financial leverage is typically calculated by taking the company's all interest-bearing debt and dividing it by total capital. So the higher the debt-to-capital ratio (i.e., financial leverage), the riskier the company. Financial leverage can amplify the potential profits to Walgreens Boots' owners, but it also increases the potential losses and risk of financial distress, including bankruptcy, if the firm cannot cover its debt costs. The degree of Walgreens Boots' financial leverage can be measured in several ways, including by ratios such as the debt-to-equity ratio (total debt / total equity), equity multiplier (total assets / total equity), or the debt ratio (total debt / total assets). Please check the breakdown between Walgreens Boots's total debt and its cash.

Walgreens Boots Volatility Drivers

Walgreens Boots unsystematic risk is unique to Walgreens Boots Alliance and usually not directly affected by the market or economic environment. An example of unsystematic risk is the possibility of poor earnings or a layoff due to coronavirus. One may mitigate nonsystematic risk by buying different securities in the same industry or by buying in different sectors. For example, if you have a position in Walgreens Boots you can also buy BJs Wholesale Club. You can also mitigate this risk by investing in the consumer staples sector as well as in companies having nothing to do with it. This type of risk is also called diversifiable risk and can be understood from analyzing Walgreens Boots important indicators over time. Here we run a correlation analysis between relevant fundamental ratios over at least ten year period to find a relationship in the way they react to changes in Walgreens Boots income statement and balance sheet. Here are more details about Walgreens volatility.
0.890.98-0.840.850.560.94-0.560.960.84-0.41-0.76-0.22-0.07-0.3-0.47-0.830.81
0.890.95-0.70.660.460.81-0.510.810.58-0.54-0.77-0.420.16-0.58-0.65-0.850.92
0.980.95-0.820.820.520.93-0.570.930.76-0.5-0.8-0.30.0-0.41-0.54-0.850.86
-0.84-0.7-0.82-0.67-0.35-0.810.24-0.85-0.770.030.440.24-0.040.180.360.71-0.73
0.850.660.82-0.670.660.94-0.720.770.64-0.6-0.850.13-0.47-0.26-0.36-0.590.44
0.560.460.52-0.350.660.58-0.480.430.38-0.4-0.540.33-0.37-0.2-0.36-0.40.29
0.940.810.93-0.810.940.58-0.640.870.71-0.51-0.850.01-0.3-0.36-0.47-0.740.64
-0.56-0.51-0.570.24-0.72-0.48-0.64-0.47-0.320.670.68-0.290.360.250.280.33-0.22
0.960.810.93-0.850.770.430.87-0.470.93-0.25-0.63-0.270.0-0.27-0.49-0.870.77
0.840.580.76-0.770.640.380.71-0.320.930.02-0.39-0.170.00.01-0.29-0.730.61
-0.41-0.54-0.50.03-0.6-0.4-0.510.67-0.250.020.850.060.250.50.360.3-0.27
-0.76-0.77-0.80.44-0.85-0.54-0.850.68-0.63-0.390.850.040.380.530.510.63-0.52
-0.22-0.42-0.30.240.130.330.01-0.29-0.27-0.170.060.04-0.660.190.180.38-0.61
-0.070.160.0-0.04-0.47-0.37-0.30.360.00.00.250.38-0.66-0.03-0.09-0.110.38
-0.3-0.58-0.410.18-0.26-0.2-0.360.25-0.270.010.50.530.19-0.030.920.65-0.39
-0.47-0.65-0.540.36-0.36-0.36-0.470.28-0.49-0.290.360.510.18-0.090.920.83-0.5
-0.83-0.85-0.850.71-0.59-0.4-0.740.33-0.87-0.730.30.630.38-0.110.650.83-0.8
0.810.920.86-0.730.440.290.64-0.220.770.61-0.27-0.52-0.610.38-0.39-0.5-0.8
Click cells to compare fundamentals

Breaking down Walgreens Boots Further

The company reported the last year's revenue of 138.75 B. Total Income to common stockholders was 760 M with profit before taxes, overhead, and interest of 30.08 B.
 2019 2020 (projected)
Consolidated Income3.77 B4.07 B
Direct Expenses96.11 B85.09 B

Will Walgreens Boots growth be reliable after the rise?

Current Risk Adjusted Performance is up to -0.07. Price may slip again. Walgreens Boots Alliance exhibits very low volatility with skewness of -0.07 and kurtosis of -0.79. However, we advise investors to further study Walgreens Boots Alliance technical indicators to make sure all market info is available and is reliable.

Our Bottom Line On Walgreens Boots Alli

Whereas some companies within the pharmaceutical retailers industry are still a little expensive, even after the recent corrections, Walgreens Boots may offer a potential longer-term growth to investors. The inconsistency in the assessment between current Walgreens valuation and our trade advice on Walgreens Boots is due to the recent market swings and your selection of investing horizon. Please use our equity advice module to run different scenarios to ensure your current risk level and investment horizon are fully reflective of your current investing preferences in regards to Walgreens Boots.

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Editorial Staff

This story should be regarded as informational only and should not be considered a solicitation to sell or buy any financial products. Macroaxis does not express any opinion as to the present or future value of any investments referred to in this post. This post may not be reproduced without the consent of Macroaxis LLC. Macroaxis LLC and Raphi Shpitalnik do not own shares of Walgreens Boots Alliance. Please refer to our Terms of Use for any information regarding our disclosure principles.

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