Source: Wikimedia Commons

After Rite Aid (NYSE:RAD) reported sales for the month of March, shares of the world's third-largest drugstore chain rose 2% to close at $6.49. Although this news indicates that the business is doing well, the company's shares are still 8% below their 52-week high of $7.05. In light of these recent developments, Foolish investors would be wise to ask themselves if now is an opportune time to consider buying into Rite Aid or if it's time to sell.

Rite Aid saw modest sales improvements despite its smaller size
For the month, Rite Aid's sales inched up 0.4% from $1.94 billion to $1.95 billion. The sales increase came on the heels of 37 store closings over the past year, bringing Rite Aid's store count down from 4,621 to 4,584. The company benefited from higher comparable-store sales, which rose 0.7% compared to the same period a year earlier.

 MetricMarch 2014March 2013
Revenue $1.95 billion $1.94 billion
Store count 4,584 4,621
Revenue [er store $425,393 $419,823

Source: Rite Aid.

The main driver behind the higher comparable-store sales was the 3.5% increase in pharmacy comps, driven in part by a 1.1% rise in prescription count. This was partially offset, however, by lackluster front-end metrics. Compared to the same period a year ago, Rite Aid's front-end comparable-store sales dropped 5%.

At first glance, the decrease in front-end sales results may look bad, but the company attributed 4.1% of that decline to a shift in the timing of Easter. Assuming that management is accurate in its assessment, the adjusted decline in front-end sales doesn't look so bad.

But how does Rite Aid compare to its peers?
Right now, Rite Aid has two major stand-alone competitors in the drugstore industry: CVS Caremark (NYSE:CVS) and Walgreen (NASDAQ:WBA). With market capitalizations of $89 billion and $64 billion, respectively, both businesses dwarf Rite Aid's $6 billion size. Over the past few years, this disparity in size has surfaced in the form of  operational performance.

Looking at each company's operations over the most recent four-year period, we see that both CVS and Walgreen trounced Rite Aid's revenue growth. Between 2010 and 2013, Walgreen's revenue rose 7% from $67.4 billion to $72.2 billion. During this period, CVS did even better with revenue growing 34% from $95.8 billion to $126.8 billion.

 Company2013 Revenue2010 RevenueImprovement
Rite Aid $25.4 billion $25.7 billion (1.2%)
Walgreen $67.4 billion $72.2 billion 7.1%
CVS $95.8 billion $126.8 billion 32.4%

Source: Rite Aid, Walgreen, and CVS.

In the case of CVS, about 12% of its sales jump came from higher comparable-store sales. The rest of its sales increase derived from the 7% rise in store count from 7,182 in 2010 to 7,660 in 2013. Walgreen similarly benefited from a 7% jump in store count from 8,046 to 8,582. But it suffered from flat comparable-store sales performance.

Over this four-year time frame, Rite Aid hasn't been so lucky. Between 2010 and 2013, the company saw its revenue fall 1% from $25.7 billion to $25.4 billion. This was driven largely by a decline in store count because of high costs and an inability to earn a profit.

Looking at revenue alone gives the impression that CVS and Walgreen are thriving while Rite Aid might be on its way out. However, this is not so clear-cut when you consider how well Rite Aid has done in terms of profitability. Between 2010 and 2013, the company swung from a loss of $506.7 million to net income of $118.1 million. Although the company's bottom line in 2013 is far from great when compared to the business's revenue, the fact that profits are rising in an increasingly competitive market shouldn't be overlooked.

Rite Aid isn't the only drugstore chain to improve its profits, though. Over the past four years, Walgreen saw its net income rise 17%, from $2.1 billion to $2.45 billion. Management attributed the company's improvement to rising sales but also chalked up the gain to a lower cost structure. CVS performed the best over the time horizon, with net income soaring 34%, from $3.4 billion to $4.6 billion.

Foolish takeaway
Based on the data provided, it's clear that Rite Aid has had a history of poor revenue growth, but this picture appears to be improving slightly. With a return to profitability, management can more adequately direct its efforts toward growing the company without the fear of reverting to negative territory. Its March sales data continues to support the idea that the business is becoming healthier, but its lack of profits in recent years suggests that CVS or Walgreen might be a better opportunity for more conservative investors.

Daniel Jones has no position in any stocks mentioned. The Motley Fool recommends CVS Caremark. 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.