Dallas, Texas 09/04/2014 (FINANCIALSTRENDS) – Rite Aid Corporation (NYSE:RAD) is a classic example in recent times of how and why share prices of perfectly balanced stock, suddenly hit the under value trend.
The drug store chain which has been under pressure in recent times due to weak sales, has been hit by the undervaluation button by analysts now.
As is typical of this industry, the drug store chain has been in the midst of a downtrend, which has not spared even larger-sized drug retailers in the country.
However, on the question of valuation, the under valuation argument does appear to be premature.
There are supporting arguments which illustrate that, not all is lost with Rite Aid Corporation (NYSE:RAD) for it now has the ‘leverage’ that was so critical to its existing in the form of the new working and financial relationship with McKesson, the drug distributor.
Though RADs woes date back to the 2009 depression, when it reached the nadir at $0.22 per share, the turnaround has been markedly present in the recent quarters.
Rite Aid Corporation (NYSE:RAD) now has the advantage of trucking with lead drug distributor, on the financial front as costs are now shelved on several aspects which were a drain on the drug retailer.
The latest quarter is definitely significantly in the argument against the undervaluation, given the revenue growth of 2.7% annually and the sales spike of 4.6%. The guidance for the third quarter is significant as well with margins now beginning to move northward due to Mckesson’s cost saving relationship.
With new look stores, the sales are brisk with prescription drug sales climbing to 1.2% average sales. As 225 more stores remodel the sales are expected to thrust forward, disrupting the negative undervalued theory!