Very rarely do investors get the opportunity to consider a purchase of a high-quality asset or company at a steep discount to the overall industry it operates within. Today, there is not only one name showcasing these symptoms, but two.

Two of America's most significant household names in the healthcare industry are being served on a silver platter. Walgreens Boots Alliance (NASDAQ: WBA) and CVS Health (NYSE: CVS) have seen their valuations fall by 29.8% and 32.7%, respectively, during the past twelve months.

The price declines seen in these two giant chains can be placed next to the performance seen in the Health Care Select Sector SPDR Fund (NYSEARCA: XLV), whose price rose by 4.8% during the same period. With a noticeable discount on the sector's performance, investors can begin to dig into which of the two represents the better potential buy.

Same Model, Different Outcomes

Investors have a pick between a new 52-week low in the case of CVS, versus a near all-time low for Walgreens. The market's reasoning behind these prices can be made sense of what each company has to offer today.  

Walgreens has made it into a list of top-5 stocks paying a high dividend yield, which calls for potential undervaluation in the underlying business. Walgreens analyst ratings seem to agree with the gist of the story, as there is a consensus of 46.5% upside potential from today's prices.

On the other hand, CVS pays a lower dividend, half of Walgreens roughly, though it offers a greater potential upside in the long run. Caught in the optimistic wave of telehealth investments, CVS is well-positioned to offer a new value pack to its customer base, attracting new money almost exclusively interested in tech growth.

CVS analyst ratings, following the thesis of a growth boost driven by online services and telehealth, reflect a consensus of 46.8% upside potential from today's prices. The trench warfare boils down to appreciation in price and future growth (CVS) and slow but steady recovery with attractive cash-flowing dividends (Walgreens).

Drivers at the Wheel 

CVS has now overtaken Walgreens when it comes to prescription drugs market share as of 2022; knowing this, Walgreens management has pivoted into a new strategy that rhymes a lot with acquisition.

According to Walgreens's third quarter 2023 earnings presentation, sales grew by 8.9%, exceeding expectations. This rate begins to turn the slow-growth thesis on its head, but wait, there's more to it. This growth is being fueled by debt used to acquire other companies.

Walgreens is playing catch-up in the telehealth space against CVS. It knows it needs to expand its services portfolio, so they've acquired names like Summit Health and CareCentrix. On the other hand, CVS grew its sales by 10.3%, growing from within.

Debt makes up 43% of CVS's balance sheet. In comparison, Walgreens carries a heavier load of 54%, not necessarily a dangerous level, though something to think about regarding the reliability of the dividend payment. 

Once again, Walgreens management acknowledges these gaps and is working to fix them. With over $800 million in cost savings and capital optimization initiatives through new acquisitions, the company is looking to reduce its debt burden with these new growth and profit centers added to the central business. 

CVS is also following in similar footsteps, as their third quarter 2023 press release highlighted the company's restructuring program. Expected to be finished by the end of 2023, this program will deliver significant cost savings, enabling similar debt paydowns and better capital structure to allow further growth.

Hard to Choose, Take Both?

Confused about which name to pick? You are not alone, as markets are also valuing these two stocks in a way that implies the same indecisiveness. Both stocks carry huge upside potential, and both management teams are on top of their game, looking to deliver for shareholders and customers.

On a forward price-to-earnings ratio, which looks to value the next twelve months of earnings rather than the past twelve months, markets are implying the same quality and value for these competitors.

Walgreens stock sells for a cheap 6.5x forward P/E, while CVS stock can be picked up for a similarly cheap 7.8x. Considering that these ratios are so close together, the perception of the future potential is as close as can be with these firms.

Recalling the lockstep analyst ratings upside, this same trend shows how closely knitted the future of these stocks is. Both represent a reasonable discount to the sector and an attractive growth/recovery story that investors can pick today and beat the broader indices on the turnaround.

All told, investors can throw the proverbial dart at any of these two names and still expect to make above-average returns. However, the best potential decision would be to allocate an even position between these two high-potential healthcare stocks.