Rite Aid Corporation (NYSE:RAD)
If there weren’t already plenty of reasons to dislike drugstore Rite Aid Corporation (NYSE:RAD), allow me to add one more: an accumulated deficit of $7.77 billion as of the fourth quarter of fiscal 2013. To put it another way, Rite Aid’s accumulated deficit is nearly three times its current market value.
Things have certainly improved on the bottom line for Rite Aid over the past two quarters, with the company surprising handily to the upside. However, it’s been much of the same for the company with regard to same-store sales figures falling another 2% in the fourth quarter and generic drugs weighing down its pharmacy margins. High levels of debt continue to plague Rite Aid and quell any chances it’s had to modernize its stores to make them more customer-friendly or aggressively advertise. Even with the addition of its loyalty rewards program, drugstore customers simply aren’t that loyal. When the top year for operating margin over the past decade is 2.7%, you know it’s likely time to move along.
Level 3 Communications, Inc. (NYSE:LVLT)
We’re taught in school that two negatives, when multiplied, equal a positive. Unfortunately, combining two bad companies in real life only leaves you with one really bad company! Thus is the plight of Level 3 Communications, Inc. (NYSE:LVLT), which in 2011 bought Global Crossing for $3 billion, merging two integrated telecommunication companies that haven’t turned a profit. As of the first quarter, Level 3 had an accumulated deficit of $12.93 billion.
What’s hampering Level 3’s growth are many of the same problems that have plagued it for years. First, the company is toting around nearly $8 billion net debt for a worrisomely high net debt to last 12 months’ adjusted-EBITDA ratio of 5.3! The interest payments alone on Level 3’s $8.6 billion in debt make turning a profit even that more difficult. The company is also encountering demand slowness in Europe and the U.S., with both economies paring back spending.Level 3 hasn’t come anywhere near turning a profit over the past decade and I’m not certain it ever will.
The article 5 Companies That Haven’t Earned Their Keep originally appeared on Fool.com and is written by Sean Williams.
Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.
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