Cramer: Takes Gains, Get Out of This Stock

(Click for video linked to a searchable transcript of this Mad Money segment)

It's been a great ride but with shares up a whopping 127% since the beginning of the year, Cramer thinks it's time to head for the exits.

"Rite Aid has been absolutely jamming – this is the kind of gain you can get when a company turns itself around," exclaimed the Mad Money host.

As a percentage gain the move is spectacular but looking at the actual share price, the gain is almost pocket change.

Rite Aid was trading at just $1 dollar a share and now it's around $3.15. Wouldn't it stand to reason that the stock has more upside with institutional investors potentially entering if it can break above $5?

Cramer doesn't think that's a bet worth making; at least not in a big way.

"The first rule of investing is that when you have a monster gain, lock in profits," Cramer said. That's only sensible.

But the Mad Money host's skepticism involves much more than simple profit taking.

Chrisho | E+ | Getty Images

He believes the sharp gains were due, in part, to a belief the stock was oversold; a thesis confirmed by recent earnings which came in much stronger than expected. And he said, the company announced plans to refinance debt at a lower interest rate - that's another bullish catalyst.

Going forward however, "Rite Aid will be valued on earnings, and when you compare it on an apples to apples basis with the two giants in the industry, CVS and Walgreen, it's just no longer the bargain it used to be," Cramer said.

That is, Rite Aid is now selling for 12.9 times next year's earnings estimates, making it only marginally cheaper than CVS at 13.2 times earnings, and Walgreen's at 13.4 times earnings.

"When you consider that CVS pays a 1.5% yield and Walgreen's yields 2.2%, while Rite Aid has no dividend whatsoever, these valuations just don't make sense," Cramer said.

"Rite Aid may have improved dramatically, but it's still worst of breed in the drugstore space," Cramer said. "It's nowhere near as good as its rivals."

Therefore Cramer believes the best move is to take gains and get out of the stock or if you have an appetite for risk, take profits and let your principal ride.

---------------------------------------------------------
Read More from Mad Money with Jim Cramer
Cramer: How to Ride Out Weakness
Cramer: Gas Prices Should Be Lower!
Powerhouse Bank v. Superstar REIT
---------------------------------------------------------

And if you're looking to put new money to work in this space, Cramer thinks the buy is CVS.

"That's because CVS is more than a drugstore, it's CVS Caremark, a pharmacy that also owns a pharmacy benefit manager. And after some hiccups in 2010 and 2011, CVS has really turned this part of the business around," Cramer said.

Call Cramer: 1-800-743-CNBC

Questions for Cramer? [e-mail]

Questions, comments, suggestions for the "Mad Money" website? [e-mail]