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Are Investors Undervaluing Kroger (KR) Right Now?

Zacks Equity Research
·3 min read

Here at Zacks, we focus on our proven ranking system, which places an emphasis on earnings estimates and estimate revisions, to find winning stocks. But we also understand that investors develop their own strategies, so we are constantly looking at the latest trends in value, growth, and momentum to find strong companies for our readers.

Considering these trends, value investing is clearly one of the most preferred ways to find strong stocks in any type of market. Value investors use a variety of methods, including tried-and-true valuation metrics, to find these stocks.

Luckily, Zacks has developed its own Style Scores system in an effort to find stocks with specific traits. Value investors will be interested in the system's "Value" category. Stocks with both "A" grades in the Value category and high Zacks Ranks are among the strongest value stocks on the market right now.

Kroger (KR) is a stock many investors are watching right now. KR is currently holding a Zacks Rank of #2 (Buy) and a Value grade of A. The stock is trading with P/E ratio of 11.46 right now. For comparison, its industry sports an average P/E of 22.23. Over the last 12 months, KR's Forward P/E has been as high as 14.46 and as low as 10.86, with a median of 12.51.

Investors will also notice that KR has a PEG ratio of 1.85. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. KR's industry currently sports an average PEG of 3.47. Over the past 52 weeks, KR's PEG has been as high as 2.83 and as low as 1.71, with a median of 2.33.

Investors should also recognize that KR has a P/B ratio of 2.59. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. This stock's P/B looks solid versus its industry's average P/B of 3.61. KR's P/B has been as high as 3.19 and as low as 2.26, with a median of 2.72, over the past year.

Value investors also frequently use the P/S ratio. This metric is found by dividing a stock's price with the company's revenue. Some people prefer this metric because sales are harder to manipulate on an income statement. This means it could be a truer performance indicator. KR has a P/S ratio of 0.2. This compares to its industry's average P/S of 0.23.

Finally, investors will want to recognize that KR has a P/CF ratio of 4.30. This data point considers a firm's operating cash flow and is frequently used to find companies that are undervalued when considering their solid cash outlook. This stock's P/CF looks attractive against its industry's average P/CF of 11.29. Over the past 52 weeks, KR's P/CF has been as high as 5.64 and as low as 4.21, with a median of 4.83.

Value investors will likely look at more than just these metrics, but the above data helps show that Kroger is likely undervalued currently. And when considering the strength of its earnings outlook, KR sticks out at as one of the market's strongest value stocks.


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