Rite Aid: Time To Buy?

Please follow this link to read my previous articles about the stock.

Rite Aid (NYSE:RAD) is an excellent investment at current price levels. Reduced debt, stronger balance sheet and the prospect of a leaner business model makes it a stock worth considering. It is still unclear how much of debt will be repaid from the funds received from Walgreens (NYSE:WBA). However, it is clear that the management wants to reduce the debt and the main use of these funds will most likely be to reduce the leverage.

I have looked at the leverage and expected changes in my previous articles. However, the change in the next few months will be significant. Knowing how much of the debt is being repaid will not be enough to calculate the expected leverage ratios. Rite Aid is selling more than 2,100 stores and this will cause the EBITDA figure to come down as well. Now, we do not know the exact reduction in EBITDA for the company. We can divide the EBITDA figure from last year on the number of stores. However, this will be misleading as it is not as simple as that. Each store has its own sales and EBITDA contribution. We can generalize and divide the EBITDA figure on all the stores for comparison purposes, but it will not be accurate until the company clarifies which stores are being sold and how deep the impact will be on EBITDA. Also, EnvisionRX’s contribution to EBITDA cannot be ignored.

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