Is Kroger (KR) a Great Value Stock Right Now?

·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.

Of these, perhaps no stock market trend is more popular than value investing, which is a strategy that has proven to be successful in all sorts of market environments. Value investors use fundamental analysis and traditional valuation metrics to find stocks that they believe are being undervalued by the market at large.

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 sporting a Zacks Rank of #2 (Buy), as well as an A grade for Value. The stock is trading with a P/E ratio of 12.94, which compares to its industry's average of 20.71. KR's Forward P/E has been as high as 15.17 and as low as 9.88, with a median of 12.60, all within the past year.

Investors will also notice that KR has a PEG ratio of 1.53. 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 2.85. Over the past 52 weeks, KR's PEG has been as high as 2.26 and as low as 1.43, with a median of 1.90.

Another notable valuation metric for KR is its P/B ratio of 3.31. 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. KR's current P/B looks attractive when compared to its industry's average P/B of 3.88. Over the past 12 months, KR's P/B has been as high as 3.83 and as low as 2.36, with a median of 2.86.

Value investors also use the P/S ratio. The P/S ratio is is calculated as price divided by sales. This is a popular metric because sales are harder to manipulate on an income statement, so they are often considered a better performance indicator. KR has a P/S ratio of 0.23. This compares to its industry's average P/S of 0.3.

Finally, investors should note that KR has a P/CF ratio of 6.76. 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. KR's P/CF compares to its industry's average P/CF of 13.17. Over the past 52 weeks, KR's P/CF has been as high as 7.82 and as low as 3.49, with a median of 4.56.

These figures are just a handful of the metrics value investors tend to look at, but they help show that Kroger is likely being undervalued right now. Considering this, as well as the strength of its earnings outlook, KR feels like a great value stock at the moment.


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