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Rite Aid Corporation Message Board

  • investora2z investora2z Apr 27, 2013 11:23 PM Flag

    Profitability is the key

    The stock performance of RAD has been excellent. From $0.95 in December to $2.5 is a huge 165% growth in 4 months. Most importantly, the stock has broken out above $2 which has been a strong resistance over many years. The negativity due to consistent losses over years has dissipated due to the performance in the last two quarters where it has reported net profits. For the full year ending 02 March, 2013, Rite Aid reported revenues of $25.392 billion ($26.121 billion in previous year) and net income of $118 million (net loss of $368 million in the last year). In the quarter ending 02 March, it reported revenues of $6.455 billion ($7.146 billion) with a net income of $123 million (net loss of $161 million in same quarter last year). Thus, though the revenues fell by ~9.7%, the company reported a profit. The company which is mainly dependent on pharmacy sales (~68%), has worked hard on cost rationalization. For healthy growth, it has to bring in new products which have a good profit margin. Even smaller companies are making news for new launches and RAD should be on the lookout for new products which may be in line with its marketing / positioning strategy. Recently, ChromaDex Corporation (CDXC) launched a low caffeine drink containing its successful proprietary ingredient pterostilbene. Chromadex's product BluScience, which contained pterostilbene, was a success. RAD seems to be on the right path, and probability of secular growth in the stock is increasing. Expectations of growth are evident in the forward P/E of 15.88 compared with the ttm P/E of 21. If it is able to post a few more quarters of profit, then the turnaround will be established. The momentum is likely to increase over the next few weeks. In any case, $2 will act as a strong base now.

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