You have been asked to assess whether Walgreen, a drugstore chain, is correctly priced relative to its competitors in the drugstore industry. The following are the price/sales ratios, profit margins, and other relative details of the firms in the drugstore industry.
|
Company
|
P/S Ratio
|
Profit Margin
|
Payout
|
Expected Growth
|
Beta
|
|
Arbor Drugs
|
0.42
|
3.40%
|
18%
|
14.0%
|
1.05
|
|
Big B
|
0.30
|
1.90%
|
14%
|
23.5%
|
0.70
|
|
Drug Emporium
|
0.10
|
0.60%
|
0%
|
27.5%
|
0.90
|
|
Fay's
|
0.15
|
1.30%
|
37%
|
11.5%
|
0.90
|
|
Genovese
|
0.18
|
1.70%
|
26%
|
10.5%
|
0.80
|
|
Longs Drug
|
0.30
|
2.00%
|
46%
|
6.0%
|
0.90
|
|
Perry Drugs
|
0.12
|
1.30%
|
0%
|
12.5%
|
1.10
|
|
Rite-Aid
|
0.33
|
3.20%
|
37%
|
10.5%
|
0.90
|
|
Walgreen
|
0.60
|
2.70%
|
31%
|
13.5%
|
1.15
|
Based entirely on a subjective analysis, do you think that Walgreen is overpriced because its price/sales ratio is the highest in the industry? If it is not, how would you rationalize its value?