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Pharmacy Returns - are pharmacy returns reasonable in the current market climate

Mon, 6 October 2008 AEST

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Frank Sirianni

PBS Reforms combined with the impact of the recent credit crunch have driven many pharmacists to ask the question - "should the prices being paid for pharmacies come down?" In the context of the current economic climate, many expect that returns should increase to reflect the increasing uncertainty and/or risks about pharmacy. But is this the case?

Pharmacy returns

Pharmacy business sales brokers generally refer to the capitalisation rate as the return on investment. But is it?

Like many investments, what brokers generally refer to as 'Return on Investment' (ROI) is yield. For property investments, it is rental yield (i.e. rent divided by purchase price of property = rent yield). For shares, the dividend yield (i.e. dividends per share divided by share price = dividend yield). For all three, pharmacy, property, and shares, these calculations ignore capital gains!

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