Rite Aid (RAD) Weak On High Volume Today

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer.

Trade-Ideas LLC identified Rite Aid ( RAD) as a weak on high relative volume candidate. In addition to specific proprietary factors, Trade-Ideas identified Rite Aid as such a stock due to the following factors:

  • RAD has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $152.9 million.
  • RAD has traded 4.4 million shares today.
  • RAD is trading at 4.87 times the normal volume for the stock at this time of day.
  • RAD is trading at a new low 3.02% below yesterday's close.

'Weak on High Relative Volume' stocks are worth watching because major volume moves tend to indicate underlying activity such as material stock news, analyst downgrades, insider selling, selling from 'superinvestors,' or that hedge funds and traders are piling out of a stock ahead of a catalyst. Regardless of the impetus behind the price and volume action, when a stock moves with strength and volume it can indicate the start of a new trend on which early investors can capitalize (or avoid losses by trimming weak positions). In the event of a well-timed trading opportunity, combining technical indicators with fundamental trends and a disciplined trading methodology should help you take the first steps towards investment success.

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More details on RAD:

Rite Aid Corporation, through its subsidiaries, operates a chain of retail drugstores in the United States. RAD has a PE ratio of 4. Currently there are 5 analysts that rate Rite Aid a buy, no analysts rate it a sell, and 1 rates it a hold.

The average volume for Rite Aid has been 25.3 million shares per day over the past 30 days. Rite Aid has a market cap of $8.9 billion and is part of the services sector and retail industry. The stock has a beta of 1.35 and a short float of 3.7% with 1.83 days to cover. Shares are up 19% year-to-date as of the close of trading on Friday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Rite Aid as a hold. 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 and weak operating cash flow.

Highlights from the ratings report include:
  • 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 5.6%. 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 -25.59%.
  • 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.

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