drugstore.com Strong, Long-Term

drugstore.com (DSCM - Snapshot Report) recently outlined its strategy to achieve profitable sales growth over the long term. This includes increasing share in the over-the-counter market, growing its international business, entering new partnership arrangements and expanding into higher margin product lines. drugstore.com believes that this strategy will enable the company to double its total sales and increase its gross profit margin to 30% by 2013.

If those targets are achieved, we estimate that drugstore.com can produce earnings per share of at least $0.30. Due to the company's potential for strong long-term earnings growth, we rate drugstore.com a Buy with a $3.25 target price.

The company also expects to have an EBITDA margin of 8% by 2013 and generate about $130 million in cumulative free cash flow over that time. drugstore.com continues to expand its reach through partnerships like its renewed agreement with Rite Aid Corp. (RAD - Analyst Report), which is a co-branded OTC store.

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