Should Value Investors Buy Kroger (KR) Stock?

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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.

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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 a variety of methods, including tried-and-true valuation metrics, to find these stocks.

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.

One company to watch right now is Kroger (KR). KR is currently sporting a Zacks Rank of #2 (Buy) and an A for Value. The stock is trading with P/E ratio of 12.63 right now. For comparison, its industry sports an average P/E of 21.14. Over the last 12 months, KR’s Forward P/E has been as high as 15.17 and as low as 9.88, with a median of 12.68.

Investors will also notice that KR has a PEG ratio of 1.42. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company’s expected earnings growth rate. KR’s industry has an average PEG of 2.60 right now. KR’s PEG has been as high as 2.26 and as low as 1.32, with a median of 1.84, all within the past year.

Investors should also recognize that KR has a P/B ratio of 3.35. The P/B is a method of comparing a stock’s market value to 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 3.98. Over the past 12 months, KR’s P/B has been as high as 3.82 and as low as 2.36, with a median of 3.01.

Value investors also love the P/S ratio, which is calculated by simply dividing a stock’s price with the company’s sales. 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 0.23. This compares to its industry’s average P/S of 0.32.

Finally, our model also underscores that KR has a P/CF ratio of 6.85. 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 current P/CF looks attractive when compared to its industry’s average P/CF of 13.57. KR’s P/CF has been as high as 7.77 and as low as 3.49, with a median of 5.63, all within the past year.

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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