Rite Aid (RAD) Stock Soars on Walgreens Bid: Book Profits - TheStreet

NEW YORK (TheStreet) -- Would you rather be lucky or smart? On September 17, we did a story about buying a dip in Rite Aid (RAD) - Get Report .

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This afternoon, the Wall Street Journal broke a story that Action Alerts PLUS holding Walgreens (WBA) - Get Report was close to a deal to buy RAD. Both stocks are up, and RAD has soared this afternoon as high as 40%. I have not read about the possible terms of the deal nor would I consider myself an expert in understanding it, so the technician in me is going with his gut and I would book profits.

Shortly after the news, Jim Cramer's charitable trust, Action Alerts PLUS, sold some WBA shares into today's strength.

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 notable return on equity, revenue growth and solid stock price performance. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income, generally higher debt management risk and poor profit margins.

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

  • Compared to other companies in the Food & Staples Retailing industry and the overall market, RITE AID CORP's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • The revenue growth came in higher than the industry average of 3.3%. Since the same quarter one year prior, revenues rose by 17.5%. 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 25.20%, exceeding the performance of the broader market during that same time frame. Although RAD had significant growth over the past year, our hold rating indicates that we do not recommend additional investment in this stock at the current time.
  • The gross profit margin for RITE AID CORP is currently lower than what is desirable, coming in at 26.75%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 0.28% trails that of the industry average.
  • Net operating cash flow has significantly decreased to -$26.26 million or 121.44% 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