Long-established in the Healthcare Providers & Services industry, Rite Aid Corp (RAD, Financial) has enjoyed a stellar reputation. It has recently witnessed a surge of 2.96%, juxtaposed with a three-month change of -55.66%. However, fresh insights from the GuruFocus Score Rating hint at potential headwinds. Notably, its diminished rankings in financial strength, growth, and valuation suggest that the company might not live up to its historical performance. Join us as we dive deep into these pivotal metrics to unravel the evolving narrative of Rite Aid Corp.
Understanding the GF Score
The GF Score is a stock performance ranking system developed by GuruFocus using five aspects of valuation, which has been found to be closely correlated to the long-term performances of stocks by backtesting from 2006 to 2021. The stocks with a higher GF Score generally generate higher returns than those with a lower GF Score. Therefore, when picking stocks, investors should invest in companies with high GF Scores. The GF Score ranges from 0 to 100, with 100 as the highest rank.
- 1. Financial strength rank: 3/10
- 2. Profitability rank: 5/10
- 3. Growth rank: 2/10
- 4. GF Value rank: 2/10
- 5. Momentum rank: 2/10
Based on the above method, GuruFocus assigned Rite Aid Corp the GF Score of 51 out of 100, which signals poor future outperformance potential.
Snapshot of Rite Aid Corp's Business
Rite Aid Corp is a large retail drugstore chain in the United States. The company reports via two segments: retail pharmacy and pharmacy services. The retail pharmacy segment generates revenue primarily through the sale of prescription drugs, along with an assortment of merchandise that includes over-the-counter medications, health and beauty aids, personal care items, cosmetics, household items, food and beverages, greeting cards, seasonal merchandise, and numerous other everyday consumables. The pharmacy-services segment relates to EnvisionRx, a fully owned subsidiary that operates as a pharmacy benefit management provider offering a broad range of pharmaceutical services.
Financial Strength Analysis
Rite Aid Corp's financial strength indicators present some concerning insights about the company's balance sheet health. The company's interest coverage ratio of 0, positions it worse than 0% of 396 companies in the Healthcare Providers & Services industry. This ratio highlights potential challenges the company might face when handling its interest expenses on outstanding debt. The company's Altman Z-Scoreis just 1.67, which is below the distress zone of 1.81. This suggests that the company may face financial distress over the next few years. Additionally, the company's low cash-to-debt ratio at 0.02 indicates a struggle in handling existing debt levels.
Profitability Analysis
Rite Aid Corp's low Profitability rank can also raise warning signals. Rite Aid Corp's Operating Margin has declined over the past five years ((-168.07%)), as shown by the following data: 2019: 0.39; 2020: 0.64; 2021: 0.20; 2022: 0.30; 2023: -0.41. Additionally, Rite Aid Corp's Gross Margin has also declined over the past five years, as evidenced by the data: 2019: 21.61; 2020: 21.56; 2021: 19.57; 2022: 20.78; 2023: 19.94. This trend underscores the company's struggles to convert its revenue into profits.
Growth Prospects
A lack of significant growth is another area where Rite Aid Corp seems to falter, as evidenced by the company's low Growth rank. Lastly, Rite Aid Corp predictability rank is just one star out of five, adding to investor uncertainty regarding revenue and earnings consistency.
Conclusion
Given the company's financial strength, profitability, and growth metrics, the GuruFocus Score Rating highlights the firm's unparalleled position for potential underperformance. It is crucial for investors to consider these factors before making investment decisions. GuruFocus Premium members can find more companies with strong GF Scores using the following screener link: GF Score Screen.
