Insiders Are Selling Rite Aid

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 |  About: Rite Aid Corporation (RAD)
by: Markus Aarnio

In this article, I will feature one drug store that has seen intensive insider selling during the last 30 days. Intensive insider selling can be defined by the following three criteria:

  1. The stock was sold by three or more insiders within one month.
  2. The stock was not purchased by any insiders in the month of intensive selling.
  3. At least two sellers decreased their holdings by more than 10%.

Rite Aid Corporation (NYSE:RAD) operates retail drugstores in the United States.

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Insider selling during the last 30 days

Here is a table of Rite Aid's insider-trading activity during the last 30 days by insider.

Name Title Trade Date Shares Sold Rule 10b5-1 Current Ownership Decrease In Ownership
Robert K. Thompson EVP Oct 18 250,000 No 157,911 shares + 250,000 options 38.0%
Marc Strassler EVP Sep 27-Oct 17 375,000 No 699,369 shares 34.9%
Douglas Donley SVP Oct 17 88,700 No 81,628 shares 52.1%
Frank Vitrano CFO Oct 11-14 1,982,900 No 1,183,384 shares 62.6%
Tony Montini EVP Oct 4 414,500 No 643,713 shares + 217,700 options 32.5%
Green Equity Investors III LP Affiliate of director Sep 27 34,000,000 No 6,000,000 85%
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There have been 37,111,100 shares sold by insiders during the last 30 days. More details about the Rule 10b5-1 trading plan can be found from this link.

Insider selling by calendar month

Here is a table of Rite Aid's insider-trading activity by calendar month.

Month Insider selling / shares Insider buying / shares
October 2013 2,836,100 0
September 2013 34,675,000 0
August 2013 0 0
July 2013 1,333,932 0
June 2013 40,500,000 0
May 2013 0 0
April 2013 73,885,260 0
March 2013 0 0
February 2013 0 0
January 2013 0 0
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There have been 153,230,292 shares sold and there have been zero shares purchased by insiders this year.

Financials

Rite Aid reported the fiscal 2014 second-quarter, which ended August 31, financial results on September 19 with the following highlights:

Revenue $6.3 billion
Net income $32.8 million
Cash $144.2 million
Debt $6.1 billion
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Outlook

Rite Aid's fiscal 2014 full-year guidance is as follows:

Revenue $25.1 billion - $25.3 billion
Adjusted EBITDA $1.24 billion - $1.30 billion
Net income $182.0 million - $268.0 million
Capital expenditures $400 million
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Competition

Rite Aid's competitors include GNC Holdings (NYSE:GNC), CVS Caremark Corporation (NYSE:CVS), and Walgreen (WAG). Here is a table comparing these companies.

Company RAD GNC CVS WAG
Market Cap: 4.69B 5.61B 75.35B 56.03B
Employees: 50,730 6,000 203,000 173,000
Qtrly Rev Growth (yoy): 0.01 0.09 0.02 0.05
Revenue: 25.26B 2.58B 123.63B 72.22B
Gross Margin: 0.29 0.38 0.19 0.29
EBITDA: 1.35B 512.58M 9.63B 4.92B
Operating Margin: 0.04 0.18 0.06 0.05
Net Income: 296.50M 264.80M 4.22B 2.45B
EPS: 0.32 2.69 3.37 2.56
P/E: 16.15 21.90 18.22 23.12
PEG (5 yr expected): 2.78 1.08 1.08 1.29
P/S: 0.19 2.13 0.62 0.78
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Rite Aid has the slowest revenue growth among these four companies.

Here is a table of these competitors' insider-trading activities this year.

Company Insider buying / shares Insider selling / shares
GNC 0 622,847
CVS 0 306,780
WAG 117,988 85,232
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Only Rite Aid has seen intensive insider selling during the past 30 days.

Conclusion

There have been six different insiders selling Rite Aid and there have not been any insiders buying Rite Aid during the past 30 days. All six of these insiders decreased their holdings by more than 10%. Rite Aid has an insider ownership of 1.10%.

There are four analyst buy ratings, four neutral ratings, and zero sell ratings with an average price target of $5.01. Rite Aid is trading at a P/E ratio of 16.15 and a forward P/E ratio of 15.47. The company has a book value of -$2.78 per share.

Before entering short Rite Aid, I would like to get a bearish confirmation from the Point and Figure chart. The three main reasons for the proposed short entry are negative book value, bearish analyst price targets and the intensive insider selling activity.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.