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Summative Assessment University of Phoenix Fin/571 Corporate Finance Professor Sommers 12/11/2023 Walgreen information
As society continues to evolve consumers and businesses require more goods and services. In the development stage of an economic cycle, consumers' demands will outweigh the supply of goods, allowing producers to increase their prices resulting in economic inflation. Previous Economic Condition In the beginning stage of the pandemic pharmaceutical companies such as Walgreens saw an increase in sales as consumers began to stock up on medical supplies and other necessities like disinfecting wipes and cleaners. During such time Walgreens filled over 600 million prescriptions showing a 4% increase in Medicaid prescriptions and a 20% increase in Medicare prescriptions which increased the company's divisional pharmacy sales by 39% however the company retail sales, gross profit dollars, and margin are highly competitive in health and beauty and the company sales continue to remain strong showing an increase in sales by 61% in 2020 with an ROA at -.70% showing a significant decline from the previous year of 4.98% and a difference in net income by –(3526.00). Economic changes/ company sales The severity, lockdown, and duration of COVID-19 reduced the number of patronages in-person shopping however, the company sales continued to increase as consumers stocked up on personal protective equipment, vitamins, and other immune boosters as a way of staying healthy. Walgreens 4 th quarter for 2021 the company filled over 800 million prescriptions whereas pharmacy sales increased by 76% and retail by 24%. Increasing the company's profit by $1,795. The overall pharmaceuticals industry is expected an in 6.1% sales by 2029. However, the
company's net operating income decreased by 23%, and EPS decreased by 18% within the same year. Market condition in 2022 – Present The overall pharmaceutical industry in the United States has emerged as one of the fastest- growing leading industries in the market at an annual rate of 6.2% with pharmaceutical revenue in the United States at 1245 billion and expected to reach 1589 billion in 2024. Increase pricing on prescription drugs. Walgreens Financial in 2022 – Present Investors are constantly seeking companies that can provide a good growth rate with reasonable/ affordable prices. According to Walgreens's financial in their 4 th quarter of 2022, they had a price-to-ratio of -10.9 which was a significant change from 2021 when their P/E was 7.03 this reflected some environmental changes such as the recent pandemic. A negative price- to-ratio indicates the Walgreen had negative earnings in 2022 with an undervalued stock at $22 per share which is 50% below the levels at the end of the 3 rd quarter in 2021. However, with federal price increases Walgreens (WBA) stock was trading at $35 and is currently 35% below the stock level, the slow sales rate and growth performance is a direct effect of the slow decline in Covid case within the United States and consumers demands for vaccinations, medications, and additional testing and the recent impact on opioid death related cases. Conclude how the market conditions that year influenced the company’s performance, such as interest rates, and pricing.
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Inflation rates and other economic issues such as lower tax refund has led consumers to a more discretionary spending habit. In 2021, Walgreens stock was $26.80 the lowest amount for the company in 11 years with a 3.3% decline in sales at its retail division, with the decrease in the company stock also has a reflection on the company's net operating income which shows a decline of 170% from the previous year with an estimated loss of 3 billion dollars. In the previous year, Walgreens had a net operating income of 1.0 billion and a decrease of 30%. The company's net cash from its operating activities was 1.2 billion in the first quarter which was an increase of 40% from the previous time frame. Conclusion As of today, the company price-to-ratio reflects they are at a loss, compared to this time last year. The current price-to-ratio indicates the company stock is overvalued compared to the same time last year. The Return on assets tells us how well Walgreens is utilizing its assets to help the company generate additional profit. As of today, the company's return on assets is -$3.17 for investors this is not a good sign compared to previous years when their return on assets was over 5%. This is a clear indicator that the company is not generating efficient income from the use of its assets. As for Walgreens's return on equity currently, as of the 3 rd quarter of 2023, the company's ROE is -11.03% compared to 2022 with an ROE of 22% the higher the ROE the better look for investors, and the lower risk on investment returns.
Reference Dukart, H. Lanoue, L. Rezende, M. , &  RUTTEN, P.  (2022, October).   Emerging from disruption: The future of pharma operations strategy https://www.mckinsey.com/capabilities/operations/our-insights/emerging-from- disruption-the-future-of-pharma-operations-strategy Walgreens Boots Alliance, Inc .   (2023, December 1).   https://finance.yahoo.com/quote/WBA BARON, C. (2023). Revenue of the worldwide pharmaceutical market from 2001 to 2022 . https://www.statista.com/statistics/263102/pharmaceutical-market-worldwide- revenue-since-2001/ Walgreen Financial Statements2009-2023/WBA . (n.d.). MacroTrends. https://www.macrotrends.net/stocks/ charts/WBA/walgreens/financial-statements