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Buy RAD, Limited Downside Risk

Summary

Rite Aid's balance sheet will be significantly improved after the deal.

Attractive target to enter pharmacy sector

Assume sale of the 2143 stores will also include the proportion of the asset and liability, then even we estimate the proportion conservatively, we can still see RAD will have a healthy asset/liability ratio.

  Current After the deal
Cash 214 214
Account receivable 1781 926.12
Inventories 2789 1450.28
Prepaid expense 192 99.84
Total Current Asset 4977 2690.24
     
Property 2218 1153.36
Goodwill 1715 891.8
other intangible 787 409.24
Deferred tax asset 1556 809.12
other assets 204 106.08
     
Total Asset 11460 6059
     
Current maturities 23 23
Account payable 1646 855.92
Accrued salaries 1339 696.28
Total current Liabilities 3008 1575.2
Long term debt 7178 7178
Lease obligation 40 20.8
Other liabilities 673 673
Total Liabilities 10899 7871.8
Total adjusted Liabilities   2721
Stockhold's equity 560 3338

Disclosure: I am/we are long RAD.

Additional disclosure: entered at $2.30