After years of a downtrend of their value, shares of Walgreens Boots Alliance Inc. NASDAQ: WBA have thrown within the towel this time. In a single day, the inventory is down over 25% in an indication that may’t be taken in another means than a ‘run’ message. Nonetheless, some stay hopeful in regards to the inventory recovering, however that might be severely disconnected from present fundamentals.

Right this moment, traders get an opportunity to audit the primary drivers behind Walgreens and are available to a better-educated conclusion as as to whether the inventory is price protecting on a watchlist. Extra particularly, traders ought to watch the developments between Walgreens and its foremost competitor, CVS Well being Co. NYSE: CVS, as a result of the tendencies couldn’t be extra obvious.

Final however not least, savvy traders perceive that it isn’t simply Walgreens and CVS at stake on this turbulent time but additionally entities that again Walgreens areas, equivalent to its landlords. In keeping with the saying, one man’s trash is one other man’s treasure, so right here is how to determine the place the true treasure hunt will find yourself.

Walgreens vs. CVS: Financials Break Down the Competitors

There may be, after all, a superb purpose for the worth crash on shares of Walgreens, and it’s obtained all the pieces to do with the corporate’s financials. For starters, traders can break aside the latest quarterly results to determine what occurred behind the scenes.

Whereas the corporate’s press launch factors to earnings per share (EPS) practically quadrupling, the truth couldn’t be additional. Subsequently, internet revenue and EPS will be simply manipulated. In distinction, different metrics like free money stream (working money stream minus capital expenditures) can not.

This is the reason traders ought to concentrate on that as a substitute, and right here’s what they might discover: a internet working outflow of $314 million, minus $1.1 billion in capital expenditures, for a detrimental free money stream of over $1.3 billion. Since an organization can not run with out money stream, seeing what administration did subsequent is sensible.

The plan is to close a ‘significant’ amount of Walgreens locations, assuming they’re unprofitable. Whereas this might release some money and minimize overhead bills, it received’t be sufficient to offset the unprofitable operations that lie on the coronary heart of the corporate.

As a result of Walgreens has no free money stream, it can not fund its operations additional with out taking up debt or diluting shareholders. Due to this, the inventory’s 8.2% dividend yield must be nothing wanting a purple flag to traders, a bait to keep away from.

Alternatively, right here’s what will be stated about CVS’s financials. The corporate’s latest quarterly results present traders working money stream of $4.9 billion, leaving them with constructive free money stream even after $705 million in capital expenditures. What administration selected to do with this capital was additionally the appropriate factor.

As much as $3 billion was put aside to repurchase inventory, compounding the upside results for present shareholders. This development have to be why analysts at J.P. Morgan Chase noticed it match to spice up CVS’s valuations to $86 a share, daring it to rally by 47.2% from the place it sits at the moment.

Now that the mud is settled, traders can zoom out of this dramatic value motion and discover themselves with the following smartest thing, Walgreens’ landlord Realty Revenue Co. NYSE: O, an actual property funding belief (REIT) recognized for paying month-to-month dividends as a substitute of quarterly.

The Finest Revenue a Dip Can Purchase: Realty Revenue Inventory

As Walgreens’ landlord, Realty Revenue inventory is uncovered to the closure of a whole lot of areas. Nonetheless, markets habitually exaggerate issues, so right here’s simply how uncovered they are surely.

In keeping with these at Stifel Nicolaus, , daring it to rally by as a lot as 24% from the place it trades at the moment. Greater than that, Wall Avenue nonetheless in Realty Revenue this yr, maintaining with inflation and GDP development.

Earlier than you take into account CVS Well being, you may wish to hear this.

MarketBeat retains observe of Wall Avenue’s top-rated and finest performing analysis analysts and the shares they advocate to their shoppers every day. MarketBeat has recognized the 5 shares that high analysts are quietly whispering to their shoppers to purchase now earlier than the broader market catches on… and CVS Well being wasn’t on the listing.

Whereas CVS Well being at present has a “Reasonable Purchase” ranking amongst analysts, top-rated analysts consider these 5 shares are higher buys.

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