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What Warren Buffett should like about Shoppers Drug Mart

Validea’s Warren Buffett-based stock-picking model looks for increased earnings per share, which Shoppers’ has every year for the past decade. The Buffett model also likes that its average return on equity is over 15 per cent for past decade.

Sean Kilpatrick/sean kilpatrick/The Globe and Mail

Validea's pick of the week provides a detailed report on a company that scores well in the stock-screening service's model portfolios. On Validea.ca, investors can analyze 1,000 Canadian stocks through 12 different guru-based models and get individual reports on each company. Globe Investor has a distribution agreement with Validea.ca. Try it.

Toronto-based Shoppers Drug Mart Corporation licenses retail drug stores operating under the Shoppers Drug Mart and Pharmaprix names. It has a network of more than 1,240 stores across Canada, a $9.3-billion market cap and has taken in more than $10.7-billion in sales in the past year. Shoppers also licenses or owns 59 medical clinic pharmacies operating under the name Shoppers Simply Pharmacy or Pharmaprix Simplement Santé and six luxury beauty destinations operating as Murale.

Validea's Warren Buffett-based stock-picking model looks for increased earnings per share, which Shoppers' has every year for the past decade. The Buffett model also likes that its average return on equity is over 15 per cent for past decade.

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Shoppers has a stellar 41 per cent return on capital, which fits with the Joel Greenblatt-based model, and offers a 2.5 per cent dividend yield.

It also has a reasonable 0.87 prices/sales ratio and solid 68 relative strength, which help earn it strong interest from the James O'Shaughnessy-based model.

Other high points:

  • Long-term debt of $247-million is less than half annual earnings of $596-million
  • Free cash flow per share of $5.81
  • Trades for a reasonable 15.7 times trailing 12-month eps

Click here for a complete breakdown of Validea's investing guru report.

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