Walgreens Boots Alliance Inc. (NASDAQ:WBA)

The analysis of the annual cash flow data over the six-year period reveals notable fluctuations and trends in the company’s operational cash generation and free cash flow to equity.

Net cash provided by operating activities

This metric shows an overall upward trend from 2014 to 2018, beginning at 3,893 million USD in 2014 and rising to a peak of 8,265 million USD in 2018. The growth indicates a strengthening in the company’s core operational cash generation capability over these years. However, in 2019 there is a significant decline to 5,594 million USD, marking a reversal of the previous growth trend and suggesting potential challenges or changes in operational performance or working capital management during that year.

Free cash flow to equity (FCFE)

This indicator exhibits more volatility compared to operating cash flow. Starting at 2,237 million USD in 2014, FCFE dramatically increases over the next two years, reaching a high of 11,751 million USD in 2016, which implies strong free cash generation available to equity holders during this period. However, in 2017, there is a substantial drop to negative 263 million USD, indicating a year in which cash outflows exceeded inflows in terms of equity free cash flow. This sharp decline contrasts starkly with the trend in net operating cash flow that year. The FCFE recovers in 2018 to 8,494 million USD and slightly declines to 6,400 million USD in 2019, maintaining positive free cash flow but at lower levels than the peak in 2016.

In summary, while net cash from operations generally grew until 2018 before declining in 2019, FCFE demonstrated considerable volatility with a peak in 2016, a sharp negative turn in 2017, followed by recovery but fluctuating levels in the subsequent years. The volatility in FCFE compared to more stable operating cash flow may reflect variations in capital expenditures, debt repayments, or other financing activities impacting cash available to equity holders.

Share Price Trend

The share price of the company experienced a notable increase from 60.2 US dollars in August 2014 to a peak of 84.95 US dollars in August 2015. Following this peak, the share price generally declined over the subsequent years, dropping to 81.02 US dollars in 2016, then further to 69.36 US dollars in 2017. The price stabilized somewhat around the 70 US dollar mark in 2018 before falling to 55.8 US dollars in 2019. This overall pattern suggests a period of strong market confidence initially, followed by a weakening sentiment or potential operational challenges in later years.

Free Cash Flow to Equity (FCFE) per Share

Free cash flow to equity per share showed significant volatility during the period. Starting at 2.35 US dollars in 2014, FCFE per share more than doubled by 2015, reaching 5.51 US dollars, and continued to grow remarkably to 10.85 US dollars in 2016. However, a sharp reversal occurred in 2017 when the figure dropped into negative territory at -0.26 US dollars, indicating a possible cash flow strain or increased capital expenditure. Recovery followed with FCFE per share climbing back to 8.95 US dollars in 2018 and slightly declining to 7.17 US dollars in 2019. This fluctuation points to operational or financial volatility impacting cash flow generation capability.

Price to FCFE Ratio (P/FCFE)

The price to FCFE ratio declined significantly from 25.58 in 2014 to 15.42 in 2015, reflecting a more attractive valuation relative to the cash flows generated by the company. It further decreased to 7.47 in 2016, indicating that the market price per share was comparatively low against FCFE per share at that time. The ratio is missing for 2017, likely due to the negative FCFE per share impacting the calculation. In 2018 and 2019, the ratio stabilized around 7.9 and 7.78 respectively, indicating continued investor valuation at a relatively low multiple of free cash flow, potentially due to cautious market sentiment following the cash flow volatility observed.

Overall Analysis

The company experienced a period of increased investor confidence and improved cash flow generation from 2014 to 2016, as reflected by rising FCFE per share and a strong share price. However, the sharp decline in FCFE per share in 2017 and the corresponding negative figure indicate financial challenges or heightened investment activities that negatively impacted cash flow. This situation coincided with a falling share price and a lack of P/FCFE data, implying market uncertainty. The partial recovery in cash flow and stabilization of valuation multiples in the final years suggest some recovery of operational or financial health, though the decreased share price signals ongoing investor caution or external pressures.