Financial Survey: Rite Aid (RAD) versus Diplomat Pharmacy (DPLO)

Rite Aid (NYSE: RAD) and Diplomat Pharmacy (NYSE:DPLO) are both small-cap retail/wholesale companies, but which is the superior business? We will contrast the two companies based on the strength of their profitability, valuation, earnings, analyst recommendations, risk, institutional ownership and dividends.

Institutional & Insider Ownership

50.4% of Rite Aid shares are owned by institutional investors. Comparatively, 76.0% of Diplomat Pharmacy shares are owned by institutional investors. 2.3% of Rite Aid shares are owned by company insiders. Comparatively, 30.2% of Diplomat Pharmacy shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company is poised for long-term growth.

Volatility and Risk

Rite Aid has a beta of 1.74, suggesting that its stock price is 74% more volatile than the S&P 500. Comparatively, Diplomat Pharmacy has a beta of 1.31, suggesting that its stock price is 31% more volatile than the S&P 500.

Analyst Ratings

This is a breakdown of recent recommendations and price targets for Rite Aid and Diplomat Pharmacy, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Rite Aid 2 5 1 0 1.88
Diplomat Pharmacy 0 5 6 0 2.55

Rite Aid currently has a consensus target price of $2.31, indicating a potential upside of 38.93%. Diplomat Pharmacy has a consensus target price of $26.35, indicating a potential upside of 9.02%. Given Rite Aid’s higher probable upside, research analysts clearly believe Rite Aid is more favorable than Diplomat Pharmacy.

Earnings and Valuation

This table compares Rite Aid and Diplomat Pharmacy’s revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Rite Aid $21.53 billion 0.08 $943.47 million ($0.02) -83.00
Diplomat Pharmacy $4.49 billion 0.40 $15.51 million $0.84 28.77

Rite Aid has higher revenue and earnings than Diplomat Pharmacy. Rite Aid is trading at a lower price-to-earnings ratio than Diplomat Pharmacy, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares Rite Aid and Diplomat Pharmacy’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Rite Aid 3.60% -8.25% -0.71%
Diplomat Pharmacy 0.23% 8.80% 4.07%

Summary

Diplomat Pharmacy beats Rite Aid on 9 of the 14 factors compared between the two stocks.

About Rite Aid

Rite Aid Corporation, through its subsidiaries, operates a chain of retail drugstores in the United States. The company operates through Retail Pharmacy and Pharmacy Services segments. The Retail Pharmacy segment sells prescription drugs; and a range of other merchandise, such as over-the-counter medications, health and beauty aids, personal care items, cosmetics, household items, food and beverages, greeting cards, seasonal merchandise, and other everyday and convenience products. This segment also operates retail clinics that provide treatment for common conditions; and a range of preventive services, including screenings, medical tests, immunizations, and basic physical exams. In addition, this segment provides healthcare coaching and disease management services. The Pharmacy Services segment provides pharmacy benefit management (PBM) services and a range of pharmacy-related services. This segment also performs prescription adjudication services for other PBMs; offers integrated mail-order and specialty and compounding pharmacy services; and provides infertility treatment, as well as drug benefits under the federal government's Medicare Part D program. As of June 20, 2017, the company operated approximately 4,500 stores in 31 states of the United States and in the District of Columbia. Rite Aid Corporation was founded in 1927 and is headquartered in Camp Hill, Pennsylvania.

About Diplomat Pharmacy

Diplomat Pharmacy, Inc. operates as an independent specialty pharmacy in the United States. The company stocks, dispenses, and distributes prescriptions for various biotechnology and specialty pharmaceutical manufacturers. It also provides specialty infusion pharmacy, patient care coordination, clinical, compliance and persistency program, patient financial assistance, specialty pharmacy training/consulting, benefits investigation, prior authorization, risk evaluation and medication strategy, retail specialty, and hub services, as well as clinical and administrative support services to hospitals and health systems. The company's primary focus is on medication management programs for individuals with complex chronic diseases, including oncology, immunology, hepatitis, multiple sclerosis, specialized infusion therapy, and various other serious or long-term conditions. The company was founded in 1975 and is headquartered in Flint, Michigan.

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