June 14, 2012
Legendary fund manager Peter Lynch once said that you shouldn't invest in any idea you couldn't illustrate with a crayon.
Though I'm not much for crayons, I do love the pithiness of that line. We regularly preach the same idea at the Fool: Don't buy what you don't understand. And if you can't simply sketch out a company's business model -- how it actually makes money -- then maybe you shouldn't be investing in it.
If you live in an urban area and you need a prescription filled, chances are you have a few options to choose from. I'm a Rite Aid (NYSE: RAD ) kinda guy myself. I was recently out of town and looking for somewhere to get some toiletries -- and a quick search on my smartphone revealed that there were no Rite Aid locations nearby. That got me wondering whether the chain is as widespread as I'd thought, as well as how it makes money. Let's take a look. (Note: I'm focusing on revenues here, not earnings.)
Source: Rite Aid 2011 10-K.
Think I missed something in this illustration? General thoughts on this exercise? Let me know in the comments section below. And if you haven't already, be sure to follow our Rite Aid news and commentary using the Fool's free new My Watchlist tool.