What this potentially means for people that are invested in Rite Aid is that the company should be reevaluated and maybe it is time to take some positions off right now. Certainly this is not going to go well for the Rite Aid stock because not only are the unable to completely sell, they are now being picked apart so Walgreens can purchase some of their stores.
Typically, a company's
financial statements are the reports that show the
financial position of the company. There are three main documents that fall into the category of financial statements. These documents include Rite Aid income statement, its balance sheet, and the statement of cash flows. Potential Rite Aid investors and stakeholders use financial statements to determine how well the company is positioned to perform in the future. Although Rite Aid investors may use each financial statement separately, they are all related. The changes in Rite Aid's assets and liabilities, for example, are also reflected in the revenues and expenses that we see on Rite Aid's income statement, which results in the company's gains or losses. Cash flows can provide more information regarding cash listed on a balance sheet, but not equivalent to net income shown on the income statement. Please read more on our
technical analysis and
fundamental analysis pages.
The goal of Rite Aid
fundamental analysis is to do accurate financial forecasts. There are several possible objectives to fundamental analysis, such as projecting of Rite Aid performance into the future periods or doing a reasonable stock valuation. The intrinsic value of Rite Aid shares is the value that is considered the true value of the share. If
the intrinsic value of Rite is higher than its market price, buying is generally recommended. If it is equal to the market price, it is recommended to hold; and if it is less than the market price, then one should sell all shares Rite Aid. Please read more on our
fundamental analysis page.
Watch out for price decline
Please consider monitoring Rite Aid on a daily basis if you are holding a position in it. Rite Aid is trading at a penny-stock level, and the possibility of delisting is much higher compared to other delisted stocks. However, just because the stock is trading under one dollar, does not mean it will be marked for deletion.
Most exchanges require public instruments, such as Rite Aid stock to be traded above the $1 level to remain listed. If Rite Aid stock price falls below $1 for 30 consecutive trading days, the exchange can delist it. Once the company reaches this point, they will be sent an initial price violation notice directly from an exchange.
How important is Rite Aid's Liquidity
Rite Aid
financial leverage refers to using borrowed capital as a funding source to finance Rite Aid ongoing operations. It is usually used to expand the firm's asset base and generate returns on borrowed capital. Rite Aid financial leverage is typically calculated by taking the company's all interest-bearing debt and dividing it by total capital. So the higher the debt-to-capital ratio (i.e., financial leverage), the riskier the company. Financial leverage can amplify the potential profits to Rite Aid's owners, but it also increases the potential losses and risk of financial distress, including bankruptcy, if the firm cannot cover its debt costs. The degree of Rite Aid's financial leverage can be measured in several ways, including by ratios such as the debt-to-equity ratio (total debt / total equity), equity multiplier (total assets / total equity), or the debt ratio (total debt / total assets). Please check the
breakdown between Rite Aid's total debt and its cash.
Breaking down Rite Aid Indicators
For people that may be invested in Walgreens, this is certainly a good thing because the company is now going to increase revenue. However, there is not a lot of growth in this market sector so acquisitions make the most sense. A company that is worldwide such as Walgreens can continue to operate whether or not this deal went through. It is a different story for Rite Aid as they are not global but rather regional, and needed this to go through for the company to reap the benefits.
Going forward, it may be difficult to convince investors to look at Rite Aid and rightly so. For those who are adverse to risk, this should be a situation that is avoided because it is still being worked through and that could bring unwanted change in an already stable portfolio. Instead, look at others that are in this sector and find which one would fit your needs best. After the dust settles, Walgreens could certainly be worth owning. For someone who already has Walgreens in their portfolio, it appears that it is safe to ride this out, but I would still research the company and situation to ensure you are in the best position possible. It is a good thing this deal is finally going forward after all this time, but it was not the best outcome for Rite Aid, but then again it is better than nothing.
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Nathan Young is a Senior Member of Macroaxis Editorial Board - US Equity Analysis. With years of experience in the financial sector, Nathan brings a diverse base of knowledge. Specifically, he has in-depth understanding of application of technical and fundamental analysis across different equity instruments. Utilizing SEC filings and technical indicators, Nathan provides a reputable analysis of companies trading in the United States.
View Profile This story should be regarded as informational only and should not be considered a solicitation to sell or buy any financial products. Macroaxis does not express any opinion as to the present or future value of any investments referred to in this post. This post may not be reproduced without the consent of Macroaxis LLC. Macroaxis LLC and Nathan Young do not own shares of Rite Aid. Please refer to our
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