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Stock Analyst Update

Rite Aid Is Far from Healed

Debt-laden firm's bottom line may continue to hemorrhage.

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Rite Aid (RAD) has cleaned out several years of accounting irregularities from its balance sheet, but its earnings prospects are as unhealthy as ever, so don't infect your portfolio with the nation's third-largest drugstore chain.

After capitalizing certain expenses as assets when it shouldn't have, Rite Aid on Tuesday restated its results from fiscal 1998 and 1999, reducing profits in those years by $1.6 billion. Meanwhile, stiffer accounting--mainly for inventory--triggered a massive loss of  $1.1 billion for fiscal 2000, which ended in February.

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Harry Milling does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.