Rite Aid is a stock that has been trampled on in the past. Even now the stock has a much lower market capitalization than its main competitors, CVS and Walgreens. One possible scenario for unlocking the value of RAD involves the sale of the Retail Pharmacy business and Rite Aid brand. What is left is the Elixir PBM organization.
An estimation of how such an approach might play out will start with a valuation per store. In 2018, Walgreens acquired 1,923 Rite Aid stores for $4.4 billion in cash. That represents an average price of $2.275 million per store. At an average price of $1.8 million per store, RAD could reasonably generate proceeds of $4.4 billion with the sale of the entire Retail Pharmacy business, including the 2,450 locations and the Rite Aid brand name (assigning no good will value to the brand). Should RAD seek a buyer for its Retail Pharmacy business, it could sell its 2,450 remaining stores as well as the Rite Aid brand. Even though many of these stores are in highly attractive locations (CA, OH, MA, MD, NJ, NY, PA, VA, etc.), let's discount the average value of each store by 20% (compared to the average price-per-store paid by Walgreens), and arrive at a relatively conservative estimate of $1.8 million per store. The remaining RAD organization essentially consists of a PBM branded as Elixir and a net amount of cash on hand of $1.2 billion, if $3.2 billion of the Retail Pharmacy sale proceeds are used to pay down the entire existing long-term debt on the company's books.
Elixir's projected sales for RAD's fiscal year 2021 (ending February 2021) are approximately $8 billion. During each of the past four (4) quarters, RAD has reported Elixir's year-over-year growth rate to be in the range of 23 - 29%.
