Better Buy: CVS Health vs. Walgreens Boots Alliance
There's more than one way to assess whether one stock is a better bargain than another.
The forward price-to-earnings (P/E) ratio is a good gauge of whether a stock is a bargain, but when a stock's growth prospects are rapidly growing or declining, the metric can be misleading. Price-to-book (P/B) values can be useful in finding companies with solid returns that are overlooked, but comparing two companies by their P/B values doesn't work well if the companies don't have similar growth and profitability.
One more metric that's useful for comparisons is looking at a company's return on equity (ROE) and whether it is rising, because it shows how profitable a company is likely to be. This last measure is why I think CVS Health (NYSE: CVS) is a better buy than its lead pharmacy competitor, Walgreens Boots Alliance (NASDAQ: WBA). Walgreens' forward P/E and P/B are only slightly lower than CVS Health's, but CVS Health's ROE is much better than Walgreens' ROE.
Source Fool.com
