Better Buy: Rite Aid Corporation Versus CVS Health

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Better Buy: Rite Aid Versus CVS Health

Source: Achillion Pharma

Better Buy: Rite Aid Versus CVS HealthThe 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

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

And, both are enjoying solid earnings growth too.

Rite Aid:•Net income of $105 million last quarter.

CVS Health:•Net income of $1.265 billion last quarter.

But, is one of these stocks a better buy than the other?

Let’s find out…

First, let’s consider operating margin.

Is one more profitable than the other?

CVS Health drops more of every dollar of its sales to the bottom line than Rite Aid.

Now, let’s consider the balance sheet.

Is one on more stable ground?

Rite Aid’s negative debt to equity indicates that it still has work to do. CVS Health’s balance sheet is well… healthier.

But what about valuation?

Is one of these stocks cheaper than the other?

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.

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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Better Buy: Rite Aid Corporation Versus CVS Health

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