NEW YORK (TheStreet) -- Rite Aid (RAD) - Get Report shares are up 1.81% to $8.73 on heavy volume Monday, continuing the strong volume trends and gains the stock saw last week when it rose 5.3% in trading over the five-day period and about 90% from the lows it was trading at in October.
Helping sustain the stock's turnaround was Rite-Aid's purchase of pharmacy benefit manager EnvisionRX for $2 billion in February as the company looks to boost its pharmacy retail business. The pharmacy retail market is expected to expand to $400 billion by 2020 from $100 billion in 2014, according to UnitedHealth (UNH) - Get Report, which announced the purchase of pharmacy benefit manager Catamaran (CTRX) for $12.8 billion today.
The stock has a solid trend line in place and notice the strong volume trends.
We also see a bullish inverse head/shoulders pattern with the stock just breaking the neckline on Friday.
The slop of relative strength is positive and while the momentum indicators show overbought, it can stay that way for a while.
Of note, there have been huge buyers of call options in the name lately, some 145K occurred two weeks ago in the 9 strike while last week more buying came in at the May 9.
Big money flows tell us where institutions are placing their bets.
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, solid stock price performance and growth in earnings per share. However, as a counter to these strengths, we also find weaknesses including weak operating cash flow and poor profit margins."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- RAD's revenue growth has slightly outpaced the industry average of 0.2%. Since the same quarter one year prior, revenues slightly increased by 5.3%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- Powered by its strong earnings growth of 150.00% and other important driving factors, this stock has surged by 26.15% over the past year, outperforming the rise in the S&P 500 Index during the same period. 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.
- The gross profit margin for RITE AID CORP is currently lower than what is desirable, coming in at 30.30%. Regardless of RAD's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 1.56% trails the industry average.
- Net operating cash flow has significantly decreased to $111.73 million or 54.21% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- You can view the full analysis from the report here: RAD Ratings Report