better buy: rite aid corporation versus cvs health
TRANSCRIPT
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Better Buy: Rite Aid Versus CVS Health
Source: Achillion Pharma
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Better Buy: Rite Aid Versus CVS Health
The Matchup: Rite Aid versus CVS Health -- two retail pharmacy titans.
•Rite Aid operates 4,572 stores and holds prescription revenue market share of 6%, making it the 3rd largest pharmacy store chain.
•CVS Health operates 7,981 stores and when combined with its pharmacy services business, its market share totals 22.6%, making it the largest pharmacy store chain.
Source: Drug Channels Institute
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Better Buy: Rite Aid Versus CVS Health
Both are enjoying solid sales growth.
Rite Aid:•Sales of $6.7 billion last quarter.
•Up 5.3% from last year.
CVS Health:•Sales of $37.1 billion last quarter.
•Up 12.9% from last year.
$, billions
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Better Buy: Rite Aid Versus CVS Health
And, both are enjoying solid earnings growth too.
Rite Aid:•Net income of $105 million last quarter.
•Up 46.6% from last year.
CVS Health:•Net income of $1.265 billion last quarter.
•Up 4.43% from last year.
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Better Buy: Rite Aid Versus CVS Health
But, is one of these stocks a better buy than the other?
Let’s find out…
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Better Buy: Rite Aid Versus CVS Health
First, let’s consider operating margin.
Is one more profitable than the other?
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Better Buy: Rite Aid Versus CVS Health
Yup.
CVS Health drops more of every dollar of its sales to the bottom line than Rite Aid.
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Better Buy: Rite Aid Versus CVS Health
Now, let’s consider the balance sheet.
Is one on more stable ground?
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Better Buy: Rite Aid Versus CVS Health
Yup.
Rite Aid’s negative debt to equity indicates that it still has work to do. CVS Health’s balance sheet is well… healthier.
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Better Buy: Rite Aid Versus CVS Health
But what about valuation?
Is one of these stocks cheaper than the other?
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Better Buy: Rite Aid Versus CVS Health
Maybe.
CVS has a lower P/E on forward EPS, but Rite Aid is cheaper on future growth (PEG Ratio) and on price to sales.
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Better Buy: Rite Aid Versus CVS Health
So, which is the better buy?
CVS Health on profitability.CVS Health on balance sheet.Toss up on valuation.Edge goes to CVS Health.
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