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2 Reasons To Avoid Rite Aid (RAD)

Over the last couple months, I’ve shown you stocks to avoid…

Stocks to consider buying…

And some of the best stocks related to the coming Internet of Things…  Which you can find linked further below.

All these recommendations are to help you either avoid pain and terrible stocks.  Or to help you find potentially great stocks to invest in during this pandemic.

If you do both well, it helps you earn higher than average investment returns and build wealth.

Because the fewer investment losses you have the more capital you keep. And the more capital you keep the faster you compound your money.

Today, I want to show you 2 Reasons To Avoid Rite Aid so you can continue building your wealth safely.

2 Reasons To Rite Aid (RAD)

Rite Aid (RAD) is the United States third largest pharmacy operator behind both CVS and Walgreens.

And its much smaller…

Its market cap is $962 million as of this writing compared to CVS at $89.3 billion and Walgreens at $34.3 billion.

But small size isn’t always a bad thing… It can often lead to higher rates of returns on your investments.

To figure out if it’s a buy though we need to do the work to see if it’s a good stock to buy now… Unfortunately, it isn’t.

Here are the 2 reasons you should avoid its stock.

  1. Its Overvalued

Its P/E is 21.2.

Its P/CF is 14.8.

Its forward P/E is 65.8.

And its enterprise value to operating income – EV/EBIT is 59.1.

On all three metrics at the top, I look to buy investments below 20 to consider them undervalued.

And on EV/EBIT I look to buy stocks below 8.

These show Rite Aid is overvalued by a large amount right now.

And this means owning its stock gives you no margin of safety in investing terminology.

When you invest in stocks that have a margin of safety it makes the investment safer.  And it also means you should expect to earn higher returns owning it in the coming years.

The inverse of this is also true…

When you invest in a stock without a margin of safety it makes the investment riskier.  And it also means you should expect to earn less owning its stock going forward.

With Rite Aid being overvalued it makes the investment riskier.


2. CVS Is Far Better

On virtually all metrics CVS is the far better investment…

Its cheap enough to buy now… And is far cheaper than Rite Aid stock.

It earns far higher profits and cash flows then Rite Aid.

CVS’ average operating profit margin and FCF/Sales margins every year over the last decade are 5.8% and 3.7% respectively.

Compared to Rite Aid’s averages of 1.4% and 0.4% respectively.

Meaning that CVS earns far higher profits every year than Rite Aid does.  Which leads to higher share prices.

Its bigger.

It has more competitive advantages… And so on.

CVS is the far better investment than Rite Aid… And by far the best investment in the US pharmacy/retail industry.

To directly see how Rite Aid compares to both CVS and Walgreens use the links below., I continue recommend you avoid Rite Aid stock in favor of CVS. To learn more reasons why click to view our articles on both CVS and Walgreens.

For the reasons in all these articles I recommend you avoid Rite Aid – and consider buying CVS – to protect your retirement portfolio.

CVS Articles

Walgreens Articles

Until then, use the following links to some of our recent articles to learn other ways to protect yourself and your investments in these uncertain times. 

Disclosure – Jason Rivera is a 13+ year veteran value investor who now spends much of his time helping other investors earn higher than average investment returns safely. He does not have any holdings in any securities mentioned above and the article expresses his own opinions. He has no business relationship with any company mentioned above

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