Wal Mart Vs Walgreen
Wal Mart Vs Walgreen
Wal-Mart and Walgreen are two companies that virtually dominate their industry. The industry in which these two companies dominate is the industry of retail (department & discount). This industry aims to provide customers a variety of goods at a low discounted price. When shopping at either Walgreen or Wal-Mart a shopper can find anything they need from clothing to auto care. This makes life a little easier for the shopper because they do not have to shop at multiple stores to get what they need because Wal-Mart and Walgreen provide everything they can possibly need and at a great price. The prices at these two stores are relatively close because if one of the two stores has lower prices they will loose the war for customers. New customers of Wal-Mart or Walgreen are of the utmost importance due to the fact that the customers of these two companies tend to be loyal customers. Meaning, when customers shop at either Wal-Mart or Walgreen they tend to shop only at the particular store. There could be a variety of reasons for this customer loyalty. These reasons can range from customer service to isle arrangement to store location. Whatever the reason for customers shopping at either Wal-Mart or Walgreen it is important for the companies to keep their customers because customers play a major role in the success of the company. While the two companies are relatively close they do differ in certain areas of their business success as well as business inadequacies.
In order to decide which company, Wal-Mart or Walgreen is more successful and to make a smarter investment decision a potential investor needs to look at key and important statistics, ratios, and factors that may contribute to a company’s success. Perhaps one of the most important ratios to look at when researching a possible investment is the price to earnings ratio or the P/E ratio. The price earning ratio is calculated by dividing the stock price per share by the earning per share. This is useful because it basically shows what a person paid for their shares compared to what they can make off their shares. This ratio is extremely important when it comes to making an investment decision because when people invest they want to make money. Wal-Mart has a respectable P/E ratio at 28.82. In comparison to the industry in which Wal-Mart belongs they are ahead by 2.05 the P/E ratio for the rest of the industry is 26.77. Wal-Mart is also above the sectors P/E ratio which is 28.61.
Another ratio that is extremely important ratio is the current ratio this ratio is calculated by dividing current assets by current liabilities. This ratio is crucial because an investor should be concerned with the company’s ability to pay off debt with in a year or an operating cycle. Basically, an investor wants to make sure that the company is not borrowing more money than it can make. Wal-Mart has current assets of (in terms of millions) $34421 and current liabilities (also in terms of millions) $37418 which means Wal-Mart has a current ratio of .91990. While this number is not that appealing it is only a current ratio which means as of now. Wal-Mart has a much more appealing debt to total assets ratio which is (in terms of millions) 1.7115. This total number is much more respectable and also shows a great deal of long term stability within the company, which would help investors make a financial investing decision. It is important for a company to show long term dependability and business endurance because investors want to feel as if their investments are not going to dissipate. Walgreen is a major competitor of Wal-Mart, thus, a proper analysis is important when deciding which company to invest in.
Walgreen is considered to be in a different industry as Wal-Mart; however, Walgreen is a very fierce competitor with Wal-Mart. Walgreen belongs to the retail (drugs) industry which is almost the same as Wal-Mart. The major difference is Walgreen has a well established pharmacy which is definitely a major contributor to the success of Walgreen. Walgreen belongs to the services sector. When it comes to the price earnings ratio Walgreen is not as dominate as Wal-Mart with a P/E ratio of 28.22. This ratio is close to Wal-Mart and is also above its industry average which is 26.81. This is also impressive because investing in a company that is a leader in its industry is much more comforting then investing in a company that is at the bottom of the industry. While Walgreen is above the industry average for P/E ratio it is actually bellow the sector which is 28.61. While these two numbers are very close Wal-Mart is above the average of its sector and industry.
While aiming to compare these two companies for an investment decision it is important to look at the same statistics and ratios. The current ratio for Walgreen is much more impressive than that of Wal-Mart at (in terms of millions) 1.7864. Wal-Mart has current assets (in terms of millions) $6937.1 and current liabilities of (also in terms of millions) $3883.2. This is impressive because Walgreen currently has more assets then they have liabilities. Walgreen has also has a much more impressive debt to total assets ratio which is (in terms of millions) 2.562. This number is much better than the ratio of Wal-Mart which makes an investor a little more comfortable because Walgreen can easily pay off their total debts which is (in terms of millions) $4722.3 with its total assets of (in terms of millions) $12097.
These two companies are very close when comparing them. Wal-Mart leads in certain aspect while Walgreen leads in other areas. Wal-Mart leads Walgreen in the P/E ratio which can lead an investor to believe they have more of an opportunity to make a larger profit. This is certainly appealing because the point of investing is to make money. While Wal-Mart is leading in the P/E ratio Walgreen holds an alarmingly commanding lead in the current ratio and the debt to total assets ratio. This difference can be looked at in two different ways. One way to look at this is Walgreen is more financially responsible because they make sure they can easily pay off their debts. Another way to look at it is Wal-Mart is making more of an effort for expansion which may be the cause for their higher P/E ratio.
These two companies are extremely close in my opinion they are both medium risk investments, however, I believe that an investor has more of an opportunity to make a larger profit. Bottom line to make a larger profit Wal-Mart seems to be a better investment decision, while an investor who is looking for a less risky investment Walgreen might be the way to go. Personally I would invest in Wal-Mart over Walgreen because I feel Wal-Mart is making more of an effort to expand which in turn could lead to a larger return on my investment.