Shoppers Drug Mart

I am reviewing this stock (TSX-SC) today as I have not reviewed it since January 2009 and the 2008 year end annual statement came in later. I bought this stock for my new Tax Free Savings Account (TFSA) in January 2009. To date, including dividends, I have made some 24% return.

When I looked at this stock in January 2009, I got earnings estimates of $2.61 and earnings came in almost spot on at $2.60. However, the estimate cash flow per share I got was $3.00 and the cash flow came in much lower at $2.20.

If you look at the growth figures for this stock, they are mostly good. The growth in cash flows are the lowest and they are coming in at 5% growth. This is a little low. I would like to see this at 8% or above. The other thing I worry about is the accrual ratio, which has usually been above 5%. This is a worry because it can point to quality of earnings. That is the earnings are not as good as they appear to be.

Now I will move on to look at the Asset/Liability Ratios. I find the A/L Ratio high and it has an average over 2.00, where anything at 1.50 and above is good. The liquidity ratio is a bit different. It is often low, but over 1.00. However, when I did this calculation for the 2nd quarter of 2009, this ratio is 1.60. Here again what you want to see is a ratio of 1.50 and above. A ratio of 1.00 is ok, but leaves little margin of current assets over current liabilities.

At the moment, I intend to hold on to my shares. The spreadsheet shows that this company has done well since it was shoved out on its own in February 2000. However, I am concerned about the amount of insider selling. I will talk more about this tomorrow.

Shoppers Drug Mart is a licensor of Shoppers Drug Mart in Canada and Pharmaprix in Quebec. The company owns and operates Shoppers Home Health Care stores. It also owns MediSystem Technologies Inc. and the new Murale Stores. Its web site is www.sc.com. See my spreadsheet at www.spbrunner.com/stocks/sc.htm.

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my website at www.spbrunner.com/stocks.html for a list of the stocks for which I have put up spreadsheets.