Will Rite Aid Get It Right by 2013?

With half of 2012 in the record books, it's important to take a look at whether the stocks that interest you can live up to their full potential. By making sure you know about a company's future plans and possible challenges, you can make a better decision about whether it's a smart investment for your portfolio.

Today, let's take a look at Rite Aid (NYSE: RAD  ) . As we saw in our look at Rite Aid last month, the retailer has rebounded somewhat despite still not being consistently profitable. But Rite Aid has a chance to take advantage of a competitor's blunder. Will it do so? Let's take a quick look at Rite Aid's prospects for the rest of the year and beyond.

Stats on Rite Aid

Average Stock Price Target $1.88
Fiscal 2013 EPS Estimate ($0.15)
Fiscal 2014 EPS Estimate ($0.08)
Fiscal 2013 Sales Growth Estimate (2.6%)
Fiscal 2014 Sales Growth Estimate 0.6%
CAPS Rating (out of 5) *

Source: Yahoo! Finance.

How will Rite Aid do the rest of the year?
For years, Rite Aid has been the odd company out in the drugstore retail space. Even as Walgreen (NYSE: WAG  ) and CVS Caremark (NYSE: CVS  ) found their respective niches and succeeded well in them, Rite Aid struggled with persistent losses and stagnant revenue.

But now, Rite Aid has a chance to shine. By attracting the customers that Walgreen has had to turn away because of its disagreement with Express Scripts (Nasdaq: ESRX  ) , Rite Aid could go a long way toward clawing back to profitability. The store has already seen some positive impact, as prescriptions filled rose 2.9% in June even as Walgreen's overall same-store sales fell 10%.

It won't be an easy trip, though. Rite Aid has a lot of debt, and even in a favorable interest rate environment, it will be hard for the company to restructure its debt to make it more manageable. In the end, the company may have to do a severely dilutive share offering or take some other draconian measures to raise capital to get its debt under control.

Investors interested in Rite Aid should look first to see whether the company can start making money. That seems like a reasonable first hurdle before committing your hard-earned money to what's been a penny stock for years. You may miss out on some profits if that comes to pass, but the risk of the stock being dead money in your portfolio is simply too great at this point.

Rite Aid has some upside potential, but if it's riskier than you have the stomach for, there are some other ideas you might like better. Let me invite you to learn about three smart long-term stock plays in the Fool's latest special report. It's yours for the taking and is absolutely free, but don't miss out -- click here and read it today.

Click here to add Rite Aid to My Watchlist, which can find all of our Foolish analysis on it and all your other stocks.

Fool contributor Dan Caplinger doesn't own shares of the companies mentioned. Motley Fool newsletter services have recommended buying shares of Express Scripts. 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 Fool has a disclosure policy.

Read/Post Comments (2) | Recommend This Article (4)

Comments from our Foolish Readers

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  • Report this Comment On July 11, 2012, at 1:36 AM, ctyank99 wrote:

    This article tells nothing new. Same old baloney from you folks. You comment "Investors interested in Rite Aid should look first to see whether the company can start making money." is ridiculus... once they start making money the stock will go up. You will then have to spend your hard earned money on a stock selling at a premium. RAD is now a discounted stock. Now is the time to buy, if you want to make real percentages.

  • Report this Comment On July 11, 2012, at 1:40 AM, ctyank99 wrote:

    Don't forget, RAD is a $26 billion dollar company. Yes, they have debt. That's the main reason the stock is selling to $1.41... they will not have trouble re-financing that debt, though. I am very bullish on Rite Aid!!! I am risking my hard earned money for the potential for very nice gains.

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