Jim Cramer: Rite Aid (RAD) Is Becoming Increasingly Profitable

NEW YORK (TheStreet) -- Shares of Rite Aid Corp  (RAD) were higher by 0.73% to $8.37 in mid-morning trading Monday, after Jim Cramer said the drugstore chain is in the middle of a multi-year turnaround, and is becoming increasingly profitable. He made the remarks on CNBC's Mad Money show Friday.

Cramer said the drugstore chain is in the middle of a multi-year turnaround, and is becoming increasingly profitable.

Rite Aid recently announced it acquired pharmacy benefit manager EnvisionRX for $2 billion.

The new addition will help the pharmacy compete with rivals Walgreens Boots Alliance (WBA) and CVS Health (CVS) in the health care cost containment space.

Cramer added that the EnvisionRX acquisition deal will help Rite-Aid grow even faster while increasing leverage to negotiate better prices for prescription medications.

He believes Rite Aid Has the most upside out of the three drugstore stocks, because shares seem to bounce back from any weakness.

Camp Hill, Penn.-based Rite Aid is a retail drugstore chain that sells prescription drugs and a range of other merchandise throughout the U.S.

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 compelling growth in net income. However, as a counter to these strengths, we also find weaknesses including generally higher debt management risk, weak operating cash flow and a generally disappointing performance in the stock itself."

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.
  • RAD's revenue growth has slightly outpaced the industry average of 5.8%. Since the same quarter one year prior, revenues slightly increased by 3.8%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • The gross profit margin for RITE AID CORP is currently lower than what is desirable, coming in at 30.13%. RAD has continued with the weak profit margin when compared to the same quarter of last year. Despite the mixed results of the gross profit margin, RAD's net profit margin of 26.79% significantly outperformed against the industry.
  • Net operating cash flow has declined marginally to $175.00 million or 9.85% when compared to the same quarter last year. Despite a decrease in cash flow RITE AID CORP is still fairing well by exceeding its industry average cash flow growth rate of -25.77%.
  • The debt-to-equity ratio is very high at 98.94 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with this, the company manages to maintain a quick ratio of 0.44, which clearly demonstrates the inability to cover short-term cash needs.
  • You can view the full analysis from the report here: RAD Ratings Report

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