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By David Berman

Shoppers Drug Mart Corp. (OTCPK:SHDMF) is attracting most of the attention among Canadian drug store chains on Thursday morning, following news that the Ontario government is reducing pharmacy reimbursements and cutting a source of profit in the process.

Shoppers shares were down 10% in late-morning trading. But others are suffering too. Jean Coutu Group Inc. (OTCPK:JCOUF) shares were down 5.9%.

Meanwhile, analysts have been quick to revise their recommendations and target prices on Shoppers Drug Mart. Here are several examples:

Credit Suisse cut its recommendation to “neutral” from “outperform” and reduced its 12-month target price to $42 from $50. Bank of America cut its target price to $43 from $47. Royal Bank of Canada cut its target price to $48 from $52. Raymond James cut its recommendation to “market perform” from “outperform” and reduced it target to $45 from $50. And Desjardins Securities cut its recommendation to “sell” from “hold” and reduced its target price to $39 from $50.

As I mentioned in the Market View video clip this morning, Shoppers shares have not fallen back to 2005 levels and are down 7% over the past 12 months – putting them at odds with most of the rest of the market.

This is supposed to be a relatively stable, recession-proof stock. But clearly, Shoppers suffers from too much exposure to the whims of government. Still, with the stock price down severely and analysts in catch-up mode, you have to wonder when the stock becomes attractive to longer-term value investors.

There’s a lot to like here. The company has delivered consistently higher quarterly profits, through good economic times and bad. And the valuation is compelling: The shares trade at 14.4-times trailing earnings right now, the only time in its 10-year history as a publicly traded stock that the P/E ratio has fallen below 15.

Source: Why Shoppers Drug Mart's Stock Is on Sale