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Are Investors Undervaluing Kroger (KR) Right Now?
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.
Looking at the history of these trends, perhaps none is more beloved than value investing. This strategy simply looks to identify companies that are being undervalued by the broader market. Value investors use tried-and-true metrics and fundamental analysis to find companies that they believe are undervalued at their current share price levels.
Zacks has developed the innovative Style Scores system to highlight stocks with specific traits. For example, value investors will be interested in stocks with great grades in the "Value" category. When paired with a high Zacks Rank, "A" grades in the Value category are among the strongest value stocks on the market today.
Kroger (KR - Free Report) is a stock many investors are watching right now. KR is currently sporting a Zacks Rank of #1 (Strong Buy), as well as an A grade for Value. The stock holds a P/E ratio of 12.48, while its industry has an average P/E of 22.12. KR's Forward P/E has been as high as 14.46 and as low as 9.24, with a median of 12.13, all within the past year.
We also note that KR holds a PEG ratio of 2.27. 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 PEG compares to its industry's average PEG of 4.21. Over the past 52 weeks, KR's PEG has been as high as 2.83 and as low as 1.42, with a median of 2.22.
Investors should also recognize that KR has a P/B ratio of 2.83. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. This company's current P/B looks solid when compared to its industry's average P/B of 3.64. Over the past year, KR's P/B has been as high as 3.19 and as low as 1.95, with a median of 2.60.
Value investors also frequently use the P/S ratio. This metric is found by dividing a stock's price with the company's revenue. This is a prefered metric because revenue can't really be manipulated, so sales are often a truer performance indicator. KR has a P/S ratio of 0.21. This compares to its industry's average P/S of 0.23.
Finally, our model also underscores that KR has a P/CF ratio of 4.87. This metric focuses on a firm's operating cash flow and is often used to find stocks that are undervalued based on the strength of their cash outlook. This company's current P/CF looks solid when compared to its industry's average P/CF of 11.67. Over the past year, KR's P/CF has been as high as 5.64 and as low as 3.68, with a median of 4.74.
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.