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Stock To Watch: Rite Aid Corporation (RAD) In Perilous Reversal

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

Trade-Ideas LLC identified Rite Aid Corporation ( RAD) as a "perilous reversal" (up big yesterday but down big today) candidate. In addition to specific proprietary factors, Trade-Ideas identified Rite Aid Corporation as such a stock due to the following factors:

  • RAD has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $123.9 million.
  • RAD has traded 162,868 shares today.
  • RAD is down 3.2% today.
  • RAD was up 5.8% yesterday.

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More details on RAD:

Rite Aid Corporation, through its subsidiaries, operates a chain of retail drugstores in the United States. RAD has a PE ratio of 18.5. Currently there are 3 analysts that rate Rite Aid Corporation a buy, no analysts rate it a sell, and 2 rate it a hold.

The average volume for Rite Aid Corporation has been 26.2 million shares per day over the past 30 days. Rite Aid has a market cap of $5.4 billion and is part of the services sector and retail industry. The stock has a beta of 1.71 and a short float of 5.4% with 1.74 days to cover. Shares are up 5.9% year-to-date as of the close of trading on Wednesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Rite Aid Corporation as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, compelling growth in net income and solid stock price performance. However, as a counter to these strengths, we also find weaknesses including poor profit margins and weak operating cash flow.

Highlights from the ratings report include:

  • RAD's revenue growth has slightly outpaced the industry average of 6.4%. Since the same quarter one year prior, revenues slightly increased by 1.9%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • Compared to its closing price of one year ago, RAD's share price has jumped by 266.66%, exceeding the performance of the broader market during that same time frame. Regarding the stock's future course, our hold rating indicates that we do not recommend additional investment in this stock despite its gains in the past year.
  • RITE AID CORP's earnings per share declined by 42.9% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, RITE AID CORP turned its bottom line around by earning $0.12 versus -$0.42 in the prior year. This year, the market expects an improvement in earnings ($0.21 versus $0.12).
  • Net operating cash flow has declined marginally to $244.01 million or 9.12% when compared to the same quarter last year. Despite a decrease in cash flow RITE AID CORP is still fairing well by exceeding its industry average cash flow growth rate of -48.17%.
  • The gross profit margin for RITE AID CORP is currently lower than what is desirable, coming in at 29.91%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 1.12% trails that of the industry average.

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