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Should Value Investors Buy Kroger (KR) Stock?

Zacks Equity Research

The proven Zacks Rank system focuses on earnings estimates and estimate revisions to find winning stocks. Nevertheless, we know that our readers all have their own perspectives, so we are always looking at the latest trends in value, growth, and momentum to find strong picks.

Of these, value investing is easily one of the most popular ways to find great stocks in any market environment. Value investors use tried-and-true metrics and fundamental analysis to find companies that they believe are undervalued at their current share price levels.

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.

One company value investors might notice is Kroger (KR). KR is currently sporting a Zacks Rank of #2 (Buy), as well as a Value grade of A. The stock is trading with P/E ratio of 12.98 right now. For comparison, its industry sports an average P/E of 22.57. Over the past year, KR's Forward P/E has been as high as 14.46 and as low as 9.55, with a median of 12.27.

Investors will also notice that KR has a PEG ratio of 2.36. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. KR's PEG compares to its industry's average PEG of 3.52. Within the past year, KR's PEG has been as high as 2.83 and as low as 1.47, with a median of 2.29.

Investors should also recognize that KR has a P/B ratio of 2.93. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. KR's current P/B looks attractive when compared to its industry's average P/B of 3.61. Over the past 12 months, KR's P/B has been as high as 3.19 and as low as 1.99, with a median of 2.64.

Finally, our model also underscores that KR has a P/CF ratio of 5.09. This metric takes into account a company's operating cash flow and can be used to find stocks that are undervalued based on their solid cash outlook. This stock's P/CF looks attractive against its industry's average P/CF of 11.29. KR's P/CF has been as high as 5.64 and as low as 3.84, with a median of 4.83, all within the past year.

These are just a handful of the figures considered in Kroger's great Value grade. Still, they help show that the stock is likely being undervalued at the moment. Add this to the strength of its earnings outlook, and we can clearly see that KR is an impressive value stock right now.


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