A company with horrible margins and massive revenue is usually very cheap relative to sales, and has to make very minor changes to improve margins. Such is the case with Rite Aid Corporation (NYSE:RAD), as it posted its first profit in more than six years in 2012. The company’s operational improvements were only possible due to new generics that produce greater margins. Now, after years of disappointment, there are rumors that the company is on pace to produce a profit north of $500 million in 2013 (trading at a forward P/E of 6.0).
I bought Rite Aid Corporation (NYSE:RAD) at $1.23 and it has returned massive gains to my portfolio and 98.11 points to My CAPS. Despite these large gains, Rite Aid Corporation (NYSE:RAD) still trades at just 0.09 times sales! In other words, its five-seven times cheaper than its competitors Walgreens and CVS. In my opinion, with Rite Aid Corporation (NYSE:RAD) seeing such vast improvements, thanks to the patent cliff, I see the upside strong from this point forward. Hence I am not selling anytime soon.
In my opinion, both Rite Aid Corporation (NYSE:RAD) and ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD) have a great deal of upside from this point forward, and I would watch both as the year continues. What’s even more encouraging is that both stocks were so cheap prior to their large gains that a larger long-term trend higher could also occur. With these things considered, I think investors should take a long hard look at both stocks to see how one or both might fit into your portfolio.
The article Are These Top Performers A Sell? originally appeared on Fool.com and is written by Brian Nichols.
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