While Rite Aid had a good run during the pandemic, it appears the stock is headed back towards the bottom – as the company reports another quarter of poor results. The retail drug store chain lost over $300 million in the fiscal 2nd quarter. This resulted in a net loss per share of $6.07, way up from the previous year’s 2nd quarter period where the company reported a net loss per share of $1.86.
Heyward Donigan, president, and CEO of Rite Aid, claims that despite this horrific performance the company has made great strides on key initiatives. Rite Aid was able to drive higher prescription growth and market share, improved operating margins, and achieved reductions in operating expenses. And, despite the anticipation of continued pressure on consumer spending coupled with supply chain hurdles, he expects higher demand for immunizations.
Immunizations – or perhaps the lack thereof – are the reason for the company’s poor performance, though. The drug store retailer saw impressive quarters during the height of the pandemic. They were one of the leading sources of COVID-19 testing and vaccinations.
But, the pandemic has dwindled and life is starting to return to a state of normalcy. Rite Aid has felt this as they are reporting huge losses in revenue from their testing and vaccination segment. This has led to the company being forced to close retail storefronts nationwide.
While Donigan remains optimistic about the future, investors are not echoing the same sentiment. The early reaction to all this has been a steep decline in Rite Aid stock price. Shares dropped 27% overnight. It has been a tough year for investors (the stock is currently down 65%), and it doesn’t appear that there is any light at the end of the tunnel.
The question now is – should investors continue holding on any longer? Or, is it time to cut losses and move on from Rite Aid? We also see investors wondering if this low point of just over $5/share presents a good opportunity to buy Rite Aid at a good value. The only way to gain a clear, emotionless recommendation on your next move with Rite Aid is through the VectorVest stock market analysis software. Here’s what you need to know…
Three Huge Red Flags Investors Need to See Regarding Rite Aid Stock (RAD)
The VectorVest system simplifies stock analysis by breaking down everything you need to know into three simple ratings: relative value (RV), relative safety (RS), and relative timing (RT). Understanding these ratings is easy, as they sit on a simple scale of 0.00-2.00, with the higher end of the range indicating above-average performance. Through an average of these three ratings, investors are given a clear buy, sell, or hold recommendation – for any stock, at any time. And there are currently three huge red flags as it pertains to Rite Aid:
- Very Poor Upside Potential: in looking at the long-term price appreciation potential for Rite Aid, we can see that the upside of this stock is poor. And that’s not just in the interim – this calculation is based on projections up to three years out. Thus, the RV rating of Rite Aid is just 0.16 – which is very poor. Moreover, the stock is overvalued right now – even at its low share price of $5.14.
- Poor Safety: In looking at the risk associated with investing in Rite Aid, VectorVest calculates a poor RS rating of 0.71. This is based on a deep analysis of Rite Aid’s financial consistency and predictability, business longevity, and debt-to-equity ratio.
- Very Poor Timing: An indicator of price trend, the RT rating for RAD currently sits at just 0.16 – which is very poor on a scale of 0.00-2.00. While this negative price trend has certainly been exacerbated by today’s news, this trend has been ongoing for a long time – as VectorVest calculates RT based on the price direction, dynamics, and magnitude in the short, mid, and long term.
Taking all this into account, VectorVest’s overall VST rating for RAD sits at 0.43 – which is very poor. Does this mean it’s time to sell? Or, does this present a low point for speculative investors to buy? To gain a clear answer on what your next steps should be, you get a free stock analysis today!
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VectorVest advocates buying safe, undervalued stocks, rising in price. As for RAD, it is overvalued with very poor upside potential and poor safety – and, it has very poor timing to boot.
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