CVS Caremark and Walgreens Co. are both free-standing pharmacies and stores (drug-retail). Both CVS Caremark Corporation and Walgreen Co. provide prescriptions and healthcare services (including nonprescription and OTC drugs), and general merchandise in the United States. Both offer walk-in clinic services, photo development, as well as basic grocery options.
CVS has approximately 7,001 stores across 45 states and Puerto Rico (the second largest to Walgreen Co. in the US), and was founded in Massachusetts in 1963. Walgreens operates in all 50 states with about 7,034 stores in the US, the District of Columbia and Puerto Rico. Walgreens was founded in Chicago, IL in 1901 and has since expanded.
Ratios + Comments:
| | |CVS | |Walgreen | |Industry | | | |Caremark | |Co. | |Average | |Ratio |Year | | | | | | |ROA |2008 |5.46% | |9.63% | |0.2 | | |2007 |4.79% | |10.57% | | | | |2006 |6.59% | |10.22% | | | | |2005 |7.92% | |10.68% | | | | |2004 |6.22% | |10.12% | | |
The return on assets (ROA) percentage shows how profitable a company's assets are in generating revenue. Compared to the industry average, CVS and Walgreen's ROA are much higher. However, Walgreen's ROA is higher than CVS's; which means that the latter is not benefiting as much from its assets as Walgreens does.
In 2008, Both Companies have less ROA than 2004. In 2008, Walgreen’s has the least ROA during the five years of Data as it has struggled to maintain its level.
Walgreen’s ROA hovers around 10%, where CVS’s ratio has a downward trend. It is important to note that the ratio Return on Assets is derived by multiplying Profit Margin by Total Asset Turnover. This means that from 2004 to 2008 either CVS Caremark’s profit margin decreased while the Total Asset T/O remained constant or vice versa, or both decreased in the 5 year time period. What actually happened in regards to CVS’s ROA’s downward trend is the profit margin increased from 3% to 3.82%, while the Total Asset T/O decreased from 2.4 to 1.5 approximately. (see final page for ratio tables)
| | |CVS | |Walgreen | |Industry | |Ratio |Year |Caremark | |Co. | |Average | |ROE |2008 |9.69% | |16.76% | |1 | | |2007 |8.42% | |18.38% | | | | |2006 |13.85% | |17.31% | | | | |2005 |14.72% | |17.54% | | | | |2004 |13.11% | |16.58% | | |
Return on Equity measures a firm's efficiency at generating profits from every unit of shareholders' equity (also known as net assets or assets minus liabilities).
ROE shows how well a company uses investment funds to generate earnings growth. Both companies have extremely higher ROE compared to the industry average. Once again, Walgreen is taking more advantage of its shareholders' equity than CVS. From 2004 to 2008, Walgreen had a...