Is Express Scripts Priced at a Value?

Express Scripts Holding Company (NASDAQ:ESRX) has declined 12% year to date. So, it maybe a good time to see if it’s priced at a value.

Quality shares

Express Scripts has an investment-grade S&P credit rating of BBB+. Furthermore, its long-term earnings per share (EPS) growth has been wonderful. The company doesn’t pay a dividend, but it has been buying back its shares in recent quarters. It repurchased $1,132.5 million worth of shares in the third quarter.

Over time the pharmacy benefit manager has been consistently growing its profits, signified by its growing net income, earnings per share, and free cash flow, but it’d be even better if it can boost its revenues, which have stagnated at roughly $100 billion since 2013.

Although its EPS growth is expected to slow down to 8% next year (compared to this year’s estimated 16% growth), it’d still be pretty good growth.

Recent results

The following data compares the results of the first three quarters with that of the same period last year. Express Scripts generated revenues of $75,424 million, which was essentially flat compared to the previous year.

Yet, its gross profit and operating income were higher. Ultimately, the PBM managed to earn net income of $1,969 million, which was 15% higher. As a result, Express Scripts’s diluted EPS were $3.09, up 27%.

At the end of the quarter, the company had cash and cash equivalents of $2,304.7 million.

What kind of returns can you expect?

From the end of October, Express Scripts’s most recent adjusted EPS guidance for this year was $6.36 to $6.42. Using the midpoint, the company trades at a forward multiple of…

Unfortunately, I’ve maxed out the number of words I can include in this excerpt which originated from my Seeking Alpha article. However, you can read the full article here: Should You Add Express Scripts To Your Portfolio?

If you like what you've just read, consider subscribing via the "Subscribe Here" form at the top right so that you will receive an email notification when I publish a new article.

Disclosure: At the time of writing, the author owns shares in Express Scripts.

Disclaimer: I am not a certified financial advisor. This article is for educational purposes, so consult a financial advisor and or tax professional if necessary before making any investment decisions.

Get Exclusive Articles from me on Seeking Alpha

  • Access my portfolio of high-quality U.S. and Canadian dividend stocks.
  • Real-time updates of when I buy or sell from this portfolio.
  • Get best ideas of the top 3 dividend stocks from my watchlist. Updated each month.
Learn More