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

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.