"Is Walgreen (NYSE: WAG) ailing?" asks Jim Stack, a fund manager and advisor noted for his safety-first approach to investing. On the contrary, he suggests, "The stock is on sale."

In his InvesTech Market Analyst, Jim and senior analyst Bruce Morison explain, "For conservative, long-term investors, the recent precipitous drop in the stock price provides an attractive buying opportunity."

"Walgreen recently reported their 33rd consecutive year of record earnings and revenues. However, their fiscal 4th quarter profits fell 3.8% from the 4th quarter in 2006. This was the first quarterly earnings decline for the company in nearly 10 years.

"The widely-presumed defensive stock tumbled 15% following the release of the report. Nevertheless, we believe the fundamentals are still intact."

The advisors continue, "The earnings shortfall was the result of lower reimbursement for generic drugs and poor control of expense growth. The 4th quarter's year-over-year comparison on generic drug sales was especially tough given that Walgreen reaped huge profits last year as Zocar, Merck's popular anti-cholesterol drug, became available in generic form in June 2006."

They explain, "This summer, there were no comparable generic launches to match the Zocar windfall. And while the generic pipeline will remain relatively thin until 2009, improved expense control, store expansion, and new growth initiatives should enable the company to maintain an enviable earnings growth rate of 13-15% for the next 3-5 years."

Meanwhile, they note, the company celebrated opening its 6,000th store last month in New Orleans -- and plans to have 7,000 stores in the U.S. by 2010, just in time for the nearly 80 million baby boomers turning 65 in 2011.

"Walgreen is aggressively positioning itself to capitalize on the post-war baby boomer generation's growing medical needs. The average 70-year-old takes 16 prescriptions a year, double the number taken by a 50-year-old."

Stack and Morison conclude, "For conservative, long-term investors, the precipitous drop in the stock price provides an attractive buying opportunity. With the decline in the share price, Walgreen's valuation, based on price-to-cash flow and price-to-book value, is the lowest it has been in the past 12 years. In addition, the company's financial position remains excellent with zero long-term debt and almost $300 million in cash and short-term instruments."

Each day, Steven Halpern's TheStockAdvisors.com features the latest investment commentary and favorite stocks of the nation's leading financial newsletter advisors.