CVS Caremark Corporation (CVS), GNC Holdings Inc (GNC), Walgreen Company (WAG): Want Shares of a Legal Drug Dealer?

I’ve been on a drug manufacturer kick lately, but I’ve gotten to thinking about how many disadvantages they have. While the manufacturer gets the most profit out of a successful drug, they also feel the pain when a lot of their potential drugs never get through clinical trials and have to be dropped. But what about the companies that can sell successful prescriptions or supplements, as well as more commonplace goods like snack foods or health care items? Let’s see how good some of these companies are.

Drug deals gone good

CVS Caremark Corporation (NYSE:CVS) is a bit of a titan, carrying $123 billion in trailing annual sales and sporting a $72 billion market cap. It’s also a half-decent deal considering that it’s trading at around twice its book value and around 19 times earnings. Unfortunately, these are some of the best things I can say about the company.

CVS Caremark Corporation (NYSE:CVS)’s profit margins are a bit low at 3.3%, and with low profit margins comes a rather low level of security if something fails. Particularly for a retail real estate-heavy company with high expenses, any significant hiccup could be dangerous to the company’s operations. In other news, CVS Caremark Corporation (NYSE:CVS) has come under fire for not disposing of patient information correctly, as well as 62 confirmed prescription errors between 2002 and 2005 — not quite the “Customer, Value, Service” the company emphasizes in interviews.

From a numbers perspective, I’m good with CVS Caremark Corporation (NYSE:CVS). Since it appears to have gotten its act together, I would suggest waiting on a nice dip in the price to lower than the S&P 500’s P/E and snatching up any shares you might want. As always, don’t buy just because some guy on the Internet suggested it–do you research first.

Gotta love the independent hustle

GNC Holdings Inc (NYSE:GNC) has an interesting business model, in which almost 1/5th of the US locations are franchises. GNC also operates through drugstore.com, which adds a flexible and higher-margin component to the mix. I also appreciate that GNC’s overall margins are 10.1%, which is strong for a $4.5 billion company.