Rite Aid Corp (RAD) — Dangerous Rating, free report for Ask Matt Readerss

Here is our free report on RAD for Ask Matt readers of Mr. Krantz’s latest column: Rite Aid stock: Look for something healthier.

Rite Aid Corp (RAD) gets a Dan­ger­ous Rat­ing because of these RED FLAGs:

  1. Very Expen­sive val­u­a­tion: cur­rent stock price implies the com­pany will grow revenues and NOPAT at 6% com­pounded annu­ally for the next 15 years while also more than doubling ROIC from 6.1% to 13.7% within the same time frame. Note that 6.5% growth is quite high compared to RAD’s past, non-acquisition, growth.
  2. Off Balance-Sheet debt: of $5,502mm or 93% of “Reported” Net Assets
  3. Asset-write-offs:  $3,417mm or 58% of “Reported” Net Assets

The last Red Flag is par­tic­u­larly dis­turb­ing b/c it means that man­age­ment has writ­ten off more than $0.58 for every $1 of assets on the company’s bal­ance sheet since 2000. All the details are in our free report on RAD. For the asset write-offs and their impact on eco­nomic earn­ings see Appen­dix 3 in our report. Our Risk/Reward rat­ing is on page 1.

See Appen­dix 4 to learn how  we cal­cu­late NOPAT and NOPAT Mar­gin for RAD. See Appen­dix 5 for details on RAD’s Invested Cap­i­tal. Appen­dix 7 (in the Return on Invested Cap­i­tal sec­tion) shows how a neg­a­tive NOPAT Mar­gin and ter­ri­bly low Invested Cap­i­tal Turns result in a neg­a­tive ROIC — dur­ing the last fiscal year.

As per and , RAD fits the pro­file of a good stock to sell.

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