"Walgreen (NYSE: WAG) shares are undervalued," says J. Royden Ward, who assesses stocs based on a strict value-basis. His the latest from The Cabot Benjamin Graham Value Letter.

"Walgreen, founded in 1901, is the largest drug store retailer based on sales. In addition to 7,000 drug stores, the company operates 680 health clinics within existing stores and on employer worksites.

"Walgreen’s clinics offer primary and acute care, pharmacy and disease management services, and health and fitness programming.

"The company’s strategy of continually adding new stores and renovating old stores rather than acquiring smaller competitors has led to steady, reliable growth for decades.

"Same store sales increased by 4.9% in October and 3.9% in November, which bodes well for 2010 sales and earnings. New management is renovating existing stores, cutting operating costs and improving customer service.

"We foresee sales and EPS growth of 8% and 18% respectively for the next 12-month period followed by 14% EPS growth in future years. The dividend yield is 1.5% and growing.

"In our analysis, the stock is undervalued at 14.8 times next 12-month EPS. The company’s stock price increased just 26% during the past decade while earnings and dividends more than tripled.

"We believe the company’s stellar performance will now be rewarded and push WAG shares to our Minimum Sell Price of 54.63 within the next one to two years."