Walgreens Financial Statements and Financial Ratios Analyzed

Brief Summary: Walgreens Boots Alliance, INC. (WBA)

The Walgreens Boots Alliance Inc., or simply Walgreens (WBA), as their headquarters in Deerfield, Illinois.  The organization competes in the healthcare sector.  Specifically, the pharmaceutical retail industry.  At present, Walgreens employs about 230,000 individuals based on Yahoo finance provided information.

Financially speaking, the organization maintains a $35.1 billion market.  Yahoo Finance reports that Walgreens has a beta of .55.  This indicates that the company is less risky as compared to the overall market.  However, based on their slide in stock price, I would say the company is almost negatively correlated to the market.  In the last 52 weeks, Walgreens stock has fluctuated between $36.65 to $64.50.  The company does pay dividends.  Walgreens dividend yield the last 12 months was 4.64%.  The next dividend payout date is in August.

Walgreens Financial Report Sources

“Walgreens 2019 Company Analysis… For Beginners: Financial Statements and Financial Ratios: Defined, Discussed, and Analyzed for 5 Years” was written by, Paul Borosky, MBA. and owner of Quality Business Plan.  In this report, I used Walgreens 2018 10k, 2017 10k annual report, 2016 10k annual report, 2015 10k annual report, and 2019 10k annual report as the basis for information gathering. 

Section 1: Walgreens Income Statement Analyzed

In this section, I walk through a broad definition as to what an income statement is and why it is important.  From this, I then discuss and define income statement line items, such as revenues, gross profits, etc. in detail.  After each line item is defined and discussed, I finally offer a summary analysis of Walgreens important income statement line item trends from 2015 to 2019, in most cases.

Walgreens Inc. Revenue Growth.

Walgreens had revenues of approximately $103 billion in 2015.  The next two years, the company would moderately increase the revenues in the 2017 with about $118 billion.  However, in the last two years, ending in 2019, the firm would substantially increase the revenues ending 2019 with revenues of approximately $136.8 billion.  Surprisingly though, the organizations net profits have actually decreased as compared to the revenues.  This is more than a little bit concerning from an investor’s perspective.

Walgreens 2022 Summary Income Statement
Column1	2022	2021	2020	2019	2018
Revenues	132,703	132,509	121,982	120,074	131,537
COGS	104,437	104,442	95,905	91,915	100,745
Gross Profit	28,265	28,067	26,077	28,159	30,792
SG&A	27,295	24,586	25,436	23,557	24,694
Depreciation	1,990	1,973	1,927	2,038	1,770
R & D
Other
Total Operating Expenses	26,878	25,725	25,095	23,393	24,503
EBIT	1,387	2,342	982	4,766	6,289
Other Income
Interest Expense	400	905	613	650	616
EBT	3,985	1,995	446	4,359	5,975
Taxes	(30)	667	339	577	998
Net Income	4,337	2,542	424	3,962	5,031

Section 2: Walgreens Balance Sheet Analyzed

For Walgreens balance sheet, I again go through each important line item from the balance sheet.  In reviewing each line item, I will define their balance sheet line item, such as cash, property, plant and equipment, and liabilities between 2015 to 2019.  Next, I then offer a summary analysis of their important balance sheet line items.

Walgreens Inc. Cash.

Walgreens Inc. ended 2019 with approximately $3 billion with cash on hand.  In the next year, Walgreens would substantially increase their cash position and in 2016 with about $9.8 billion in the bank.  However, the organization would then continually drop in their cash position ending 2019 with $1 billion in the bank.  The substantial reduction in cash may be due to an acquisition.  Also, the company may have taken out significant debt in 2016, which drove up their cash position.

Walgreens 2022 Summary Balance Sheet
Column1	2022	2021	2020	2019	2018
Cash	1,358	559	469	1,023	785
Short Term Investment	1,114	634
Account Receivable	5,017	5,663	4,110	7,226	6,573
Inventory	8,353	8,159	7,917	9,333	9,565
Other
Current Assets	16,902	15,814	18,073	18,700	17,846
Net PPE	11,729	12,247	12,796	13,478	13,911
Goodwill	22,280	12,421	12,013	16,560	16,914
Other
Total Assets	90,124	81,285	87,174	67,598	68,124
Accounts Payable	11,255	11,136	10,145	14,341	13,566
Accrued Expense	7,899	7,260	5,861	5,474	5,862
Accrued Taxes	84	94	95	216	273
Notes Payable	1,059	1,305	325	5,738	1,966
LT Debt - Current
Other
Total Current Liabilities	22,583	22,054	27,070	25,769	21,667
LT Debt	10,615	7,675	12,203	11,098	12,431
Other
Total Liabilities	59,717	57,145	66,038	43,446	41,435
Common Stock	10,950	11,000	10,773	10,651	10,505
Treasury	20,683	20,593	20,575	19,057	15,047
Retained Earnings	37,801	35,121	34,210	35,815	33,551
Other
Total Equity	29,366	23,822	21,136	24,152	26,689
Total Equity & Liability	90,124	81,285	87,174	67,598	68,124

Section 3: Walgreens Financial Ratios Analyzed

For this section, I have chosen several different financial ratios to review for Walgreens from 2015 to 2019.  In reviewing each of their financial ratios, I first start with defining the financial ratio.  Next, I supply the financial formula for calculating the specific ratio.  Finally, I offer a brief analysis of their important Financial ratios. 

Walgreens Inc. Current Ratio.

In 2015, Walgreens had a current ratio of approximately 1.19.  Because the company does deal with retail, the organization should employ a lower current ratio as compared to other industries.  For example, Walmart continuously has a current ratio well below 1.0.  This is because these types of organizations continually generate cash on a daily basis.  This enables the firm to optimize its current assets at a higher rate as compared to other industries.  In my most humble of opinion, Walgreens needs to employ similar strategies as compared to other retail industry competitors.

Walgreens Inc. Total Asset Turnover.

Walgreen's total asset turnover ended 2015 at 1.50.  In the next four years, Walgreens will continually improve their total asset turnover ending 2019 with 2.02.  This indicates that Walgreens management teams are taking steps to continually increase their total asset utilization.  Also, the firm may be liquidating underperforming assets to help improve this ratio on a continuous basis.

Walgreens Inc. Return on Assets.

Walgreen's return on assets ended 2015 at 6.22%.  In the next four years, Walgreens would fluctuate between 7.39% in 2018 to 5.77% in 2016.  The significant fluctuation of return on assets shows that the organization does not have a coherent strategy to continually improve and optimize the usage of assets from the perspective of revenue generation.  To improve on this ratio, the organization may wish to close down underperforming stores or take action to improve inventory holding practices.

Walgreens Inc. Debt ratio.

Walgreens ended 2015 with the debt ratio of 19.36%.  In the next year, the organization’s debt would climb to 25.73%.  Fortunately though, the last three years, Walgreens has taken significant steps to reduce their current debt ratio.  The steps resulted in a debt ratio of 16.42% in 2019.  In my opinion, this debt ratio may be an optimal level for the organization.  Going any lower may jeopardize the company’s ability to exploit right off opportunities for interest payments.  Also, additional funds that may be paid to paying down the debt could be used for expansion purposes.