Why Rite Aid Is Poised to Pull Back
Based on the aggregated intelligence of 180,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, retail drugstore operator has received a distressing two-star ranking.
With that in mind, let's take a closer look at Rite Aid and see what CAPS investors are saying about the stock right now.
Camp Hill, Pa. (1927)
Chairman/CEO John Standley
CFO Frank Vitrano
Return on Equity (average, past 3 years)
$129.5 million/$6.1 billion
Sources: S&P Capital IQ and Motley Fool CAPS.
On CAPS, 16% of the 1,028 members who have rated Rite Aid believe the stock will underperform the S&P 500 going forward.
Rite Aid has rallied this year after it surprised investors and analysts with its first profit in several years. However, the company's outperformance was probably a fluke, driven by the Walgreens-Express Scripts dispute. With those two companies having resolved their differences, Rite Aid sales growth has stalled out. The steady growth and superior scale of [CVS Caremark] and Walgreens will continue to squeeze Rite Aid over the next few years, outweighing any benefit from the aging of the U.S. population.
If industry conditions improve dramatically, Rite Aid could spike because it has a such a low market cap (and is highly leveraged). On the other hand, a downturn could send the company into bankruptcy. This "turnaround story" doesn't seem to be worth the risk.
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The article Why Rite Aid Is Poised to Pull Back originally appeared on Fool.com.Fool contributor Brian Pacampara has no position in any stocks mentioned. The Motley Fool recommends and owns shares of Express Scripts. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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