NEW YORK (TheStreet) -- Shares of Rite Aid (RAD) are gaining by 2.66% to $8.87 in Thursday's pre-market trading session after analysts at Credit Suisse today reinstated their coverage of the drugstore chain.
The firm issued an "outperform" rating and a price target of $10 as the company has made good progress on its turnaround. Analysts expect further improvement as management pushes forward with numerous traffic-focused initiatives.
The recent acquisition of EnvisionRX for $2 billion enhances the company's outlook, according to the analyst note.
"We continue to believe the industry is poised for more consolidation with leading players on the prowl, and see RAD as one of the most likely targets," analysts added.
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