Are Investors Undervaluing Kroger (KR) Right Now?
While the proven Zacks Rank places an emphasis on earnings estimates and estimate revisions to find strong stocks, we also know that investors tend to develop their own individual strategies. With this in mind, we are always looking at value, growth, and momentum trends to discover great companies.
Of these, value investing is easily one of the most popular ways to find great stocks in any market environment. Value investors rely on traditional forms of analysis on key valuation metrics to find stocks that they believe are undervalued, leaving room for profits.
In addition to the Zacks Rank, investors looking for stocks with specific traits can utilize our Style Scores system. Of course, value investors will be most interested in the system's "Value" category. Stocks with "A" grades for Value and high Zacks Ranks are among the best value stocks available at any given moment.
One company value investors might notice is Kroger (KR). KR is currently sporting a Zacks Rank of #2 (Buy) and an A for Value. The stock holds a P/E ratio of 13.64, while its industry has an average P/E of 20.79. Over the past 52 weeks, KR's Forward P/E has been as high as 14.32 and as low as 9.88, with a median of 12.48.
We also note that KR holds a PEG ratio of 2.14. 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 3.07. Over the past 52 weeks, KR's PEG has been as high as 2.71 and as low as 1.56, with a median of 2.01.
Another notable valuation metric for KR is its P/B ratio of 3.09. 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. This stock's P/B looks attractive against its industry's average P/B of 3.76. Within the past 52 weeks, KR's P/B has been as high as 3.09 and as low as 2.36, with a median of 2.75.
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 0.22. This compares to its industry's average P/S of 0.24.
Finally, our model also underscores that KR has a P/CF ratio of 5. 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 stock's P/CF looks attractive against its industry's average P/CF of 12.35. Within the past 12 months, KR's P/CF has been as high as 5.11 and as low as 3.49, with a median of 4.53.
These are only a few of the key metrics included in Kroger's strong Value grade, but they help show that the stock is likely undervalued right now. When factoring in the strength of its earnings outlook, KR looks like an impressive value stock at the moment.
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