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Rite Aid (RAD) Is Water-Logged And Getting Wetter Today

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 ( RAD) as a "water-logged and getting wetter" (weak stocks crossing below support with today's range greater than 200%) candidate. In addition to specific proprietary factors, Trade-Ideas identified Rite Aid 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 $170.1 million.
  • RAD has traded 21.7 million shares today.
  • RAD traded in a range 206.6% of the normal price range with a price range of $0.40.
  • RAD traded below its daily resistance level (quality: 109 days, meaning that the stock is crossing a resistance level set by the last 109 calendar days. The resistance price is defined by the Price - $0.01 at the time of the signal).

Stocks matching the 'Water-Logged and Getting Wetter' criteria are worthwhile stocks to watch for a variety of factors including historical back testing and volatility. Trade-Ideas targets these opportunities because the stock is exhibiting an unusual behavior while displaying negative price action. In this case, the stock crossed an important inflection point; namely, "support" while at the same time the range of the stock's movement in price is twice its normal size. This large range foreshadows a possible continuation as the stock moves lower.

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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 41.0. Currently there are 3 analysts that rate Rite Aid a buy, no analysts rate it a sell, and 2 rate it a hold.

The average volume for Rite Aid has been 28.7 million shares per day over the past 30 days. Rite Aid has a market cap of $7.2 billion and is part of the services sector and retail industry. The stock has a beta of 1.84 and a short float of 4.6% with 1.71 days to cover. Shares are up 39.3% year-to-date as of the close of trading on Friday.

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TheStreetRatings.com Analysis:

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

Highlights from the ratings report include:

  • RAD's revenue growth has slightly outpaced the industry average of 4.8%. Since the same quarter one year prior, revenues slightly increased by 2.7%. 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.
  • Net operating cash flow has increased to $239.75 million or 29.98% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 13.02%.
  • 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 ($0.35 versus $0.22).
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Food & Staples Retailing industry. The net income has significantly decreased by 53.8% when compared to the same quarter one year ago, falling from $89.66 million to $41.45 million.
  • The gross profit margin for RITE AID CORP is currently lower than what is desirable, coming in at 29.48%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 0.64% trails that of the industry average.

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

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