Don't Get Too Bullish on Rite Aid's Recovery

NEW YORK (TheStreet) -- Shares of Rite Aid (RAD) are getting a bump Thursday morning following the release of better-than-expected fourth-quarter earnings.

The stock was up 29 cents, or 4.8%, at $6.40 early in Thursday's session.

This is welcome news to those shareholders who lived through a five-year period when the stock bounced between the $1 and $2 level before showing signs of life last April.

Following six consecutive years of losses, Rite Aid swung back to a small profit last year. Since then, shares have risen more than 250%, making this stock one of the big comeback stories of the past year.

Fiscal fourth-quarter revenue of $6.59 billion was just above the $6.54 billion consensus estimate, but adjusted earnings per share were 10 cents, easily topping the average analyst estimate of 4 cents, and that's what's driving the excitement Thursday.

The company indicated on Thursday's conference call that it is making the transition from turnaround to growth. That's what shareholders love to hear: crisis averted, moving on to bigger and better things.

As a deep value investor, I love turnaround stories. Rite Aid has fought a long uphill battle against bigger rivals CVS Caremark (CVS) and Walgreen (WAG). The problem, however, is that it appears the easy money has already been made here.

The concern that I have now is the company's debt load, which stood at nearly $5.7 billion at year-end, down from $5.9 billion last year. That translated into $425 million in interest expense for the year. That's a heavy burden to carry, especially for a company with $146 million in cash.

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