This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

Why Rite Aid (RAD) Stock Is Down Today

Stocks in this article: RAD

NEW YORK (TheStreet) -- Rite Aid  (RAD) fell Tuesday amid a Bloomberg report that the drugstore chain's memory tests, designed to provide early warnings for Alzheimer's, have come under scrutiny from doctors.

Some doctors criticize the tests because they claim they do not work properly and could cause unnecessary panic among those who do not actually have Alzheimer's. Rite Aid is rolling out the tests this month at more than 4,000 locations in conjunction with the nonprofit advocacy group Alzheimer's Foundation of America. The 5-minute to 10-minute test contains oral and written questions and checks for early memory loss, including types connected to Alzheimer's and dementia, according to the foundation.

The tests could raise awareness for the disease and could encourage someone to see a doctor sooner rather than later, according to foundation president Carol Steinberg. But some doctors claim the tests are not totally accurate and those who do not perform well on the exam could spend unnecessary time, money and stress on a disease they do not actually have. These doctors want the tests to be administered in a medical setting with trained professionals.

Must Read: Warren Buffett's 25 Favorite Stocks

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

"Teaching someone how to perform a cognitive assessment is not a trivial manner," David Knopman, a professor of neurology at the Mayo Clinic in Minnesota, told Bloomberg in a telephone interview. "It takes some training and background in knowing about neurology."

Knopman is a part of the scientific advisory board of the Alzheimer's Association, which does not support the tests.

Rite Aid also continued to fall on reduced guidance for its first quarter and fiscal year. Rite Aid said last week it now expects net income between $35 million and $45 million and adjusted earnings of 4 cents a share for the quarter that ended in May. Analysts surveyed by Thomson Reuters expected net income of $76 million and earnings of 8 cents a share. 

The company also reduced its EPS guidance for fiscal 2015 to a range of 30 cents to 40 cents, down from its previous estimate of 31 cents to 42 cents.

The stock was down 1.76% to $7.25 at 11:37 a.m.

Separately, TheStreet Ratings team rates RITE AID CORP as a "hold" with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:

"We rate RITE AID CORP (RAD) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its revenue growth and solid stock price performance. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income, poor profit margins and weak operating cash flow."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • RAD's revenue growth has slightly outpaced the industry average of 5.7%. Since the same quarter one year prior, revenues slightly increased by 2.2%. 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.
  • RITE AID CORP has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from 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 increased its bottom line by earning $0.22 versus $0.12 in the prior year. This year, the market expects an improvement in earnings ($0.36 versus $0.22).
  • Compared to its closing price of one year ago, RAD's share price has jumped by 175.17%, exceeding the performance of the broader market during that same time frame. Looking ahead, however, we cannot assume that the stock's past performance is going to drive future results. Quite to the contrary, its sharp appreciation over the last year is one of the factors that should prompt investors to seek better opportunities elsewhere.
  • The gross profit margin for RITE AID CORP is currently lower than what is desirable, coming in at 30.13%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 0.83% trails that of the industry average.
  • Net operating cash flow has decreased to $194.13 million or 11.90% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
  • You can view the full analysis from the report here: RAD Ratings Report

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

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.

Check Out Our Best Services for Investors

Action Alerts PLUS

Jim Cramer and Stephanie Link reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

Jim Cramer's protégé, David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
Try it NOW
Try it NOW
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

Jim Cramer's protégé, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 16,461.32 -153.49 -0.92%
S&P 500 1,927.11 -14.17 -0.73%
NASDAQ 4,382.8470 -36.6310 -0.83%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs