However, the cash-on-hand of $1.2 billion (from the sale of the Retail Pharmacy business after long-term debt payoff) produces additional value of $22.00 per share, resulted in a stock price value of more than $50 per share (which is almost 2X the closing price of $25.70 on Monday, March 15, 2021). Using a highly conservative PE multiple of 8, a stock price of $28.80 results. With only 55,000,000 shares outstanding today, the $200 million EBITDA generated by ELIXIR translates to roughly $3.60 per share in earnings. Once again, I am taking a conservative estimate, and basically considering that a business that has grown 23 - 29% each quarter for the past year, will suddenly see little to no growth in the upcoming year. ELIXIR's projected EBITDA for fiscal 2022 (beginning March of 2021) will likely be approximately $200 million. During each of the past four (4) quarters, RAD has reported ELIXIR's year-over-year growth rate to be in the range of 23 - 29%. The remaining RAD organization essentially consists of a PBM branded as ELIXIR and a net amount of cash on hand of $1.2 billion, if $3.2 billion of the Retail Pharmacy sale proceeds are used to pay down the entire existing long-term debt on the company's books.ĮLIXIR's projected sales for RAD's fiscal year 2021 (ending February 2021) are approximately $8 billion. Even though many of these stores are in highly attractive locations (CA, OH, MA, MD, NJ, NY, PA, VA, etc), let's discount the average value of each store by 20% (compared to the average price-per-store paid by Walgreens), and arrive at a relatively conservative estimate of $1.8 million per store. Should RAD seek a buyer for its Retail Pharmacy business, it could sell its 2,450 remaining stores as well as the Rite Aid brand. At an average price of $1.8 million per store, RAD could reasonably generate proceeds of $4.4 billion with the sale of the entire Retail Pharmacy business, including the 2,450 locations and the Rite Aid brand name (assigning no good will value to the brand). That represents an average price of $2.275 million per store. In 2018, Walgreens acquired 1,923 Rite Aid stores for $4.4 billion in cash. What is left is the ELIXIR PBM organization.Īn estimation of how such an approach might play out will start with a valuation per store. One possible scenario for unlocking the value of RAD involves the sale of the Retail Pharmacy business and Rite Aid brand.
Even now the stock has a much lower market capitalization than its main competitors, CVS and Walgreens. Rite Aid is a stock that has been trampled on in the past.
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