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Walgreen Co. Message Board

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  • Dimitrailexander: I noticed that you never mentioned any of the business fundamentals of Walgreens. PE is useless!! If
    Walgreens earnings growth just stays at 11% for 5 years then increases to 13% for another 5 years, then discounted to present value at
    approx. 12% the stock is undervalued. Projected earnings for only a year or ,even more useless, using past earnings is a waste of
    time that is what the PE does. The only problem with Walgreens at this time is inventory turnover is slow and increasing...And
    accounts receivables have been trendind up for the last 5 Years. I hope you have combed Walgreens annual report for the real facts,
    instead of using the PE ratio!!

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    • Someone said:

      If Walgreens earnings growth just stays at 11% for 5 years then increases to 13% for another 5 years, then discounted to present value at approx. 12% the stock is undervalued.

      How does one come to the conclusion that 12% is the correct discount to apply in this instance? It seems very high to me.

      Please explain.

      • 1 Reply to usonian
      • If you think the discounting rate is too high but yet Walgreens stock is still undervalued; I guess you would be a buyer!!
        The discount rate is obviously arbitrary. But to answer your question, I am a value investor I demand a 10% return on my money
        as a minimum. Thus when I want forecasted present value of a stock I use a discount rate of 10%+ inflation. Remember I said I
        am a value investor, this hard and fast rule enforces a little more discipline on my buying habits. But I am glad to see that
        you know what a discount rate is, most don't!!

 
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