The Kroger Co (KR, Financial) has recently experienced a daily gain of 4.02% and a 3-month gain of 3.58%. The company's Earnings Per Share (EPS) stands at 3.49. But the question remains, is the stock fairly valued? This article delves into the valuation analysis of The Kroger Co, providing a comprehensive guide for potential investors. Read on for an insightful exploration.
Company Introduction
The Kroger Co, the leading American grocer, operates 2,719 supermarkets under multiple banners across the country. With 83% of its stores housing pharmacies and nearly 60% selling fuel, the company also operates around 120 fine jewelry stores. The Kroger Co's sales come almost entirely from the United States. Currently, the company's stock price stands at $47.36, with a market cap of $34 billion, and is believed to be fairly valued based on the GF Value calculation.
Understanding the GF Value
The GF Value is a proprietary measure of a stock's intrinsic value. This measure incorporates historical trading multiples, a GuruFocus adjustment factor based on past performance and growth, and future business performance estimates. The GF Value Line on our summary page gives an overview of the fair value that the stock should be traded at.
At its current price of $47.36 per share, The Kroger Co has a market cap of $34 billion, and the stock is believed to be fairly valued. As a result, the long-term return of its stock is likely to be close to the rate of its business growth.
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The Kroger Co's Financial Strength
Investing in companies with poor financial strength can result in a higher risk of permanent loss of capital. Therefore, it is crucial to review a company's financial strength before deciding to invest in its stock. The Kroger Co's cash-to-debt ratio is 0.19, which is worse than 66.56% of 308 companies in the Retail - Defensive industry. However, GuruFocus ranks the overall financial strength of The Kroger Co at 6 out of 10, indicating fair financial strength.
Profitability and Growth
Investing in profitable companies, especially those demonstrating consistent profitability over the long term, poses less risk. The Kroger Co has been profitable 10 over the past 10 years. Over the past twelve months, the company had a revenue of $148.80 billion and Earnings Per Share (EPS) of $3.49. Its operating margin is 2.75%, which ranks worse than 55.56% of 306 companies in the Retail - Defensive industry. However, GuruFocus ranks the profitability of The Kroger Co at 9 out of 10, indicating strong profitability.
Growth is a crucial factor in a company's valuation. The 3-year average annual revenue growth rate of The Kroger Co is 10.3%, which ranks better than 69.31% of 290 companies in the Retail - Defensive industry. The 3-year average EBITDA growth rate is 9.8%, which ranks better than 50.39% of 258 companies in the same industry.
Another way to evaluate a company's profitability is to compare its return on invested capital (ROIC) and the weighted cost of capital (WACC). For the past 12 months, The Kroger Co's ROIC is 6.95, and its WACC is 6.24.
Conclusion
Overall, The Kroger Co (KR, Financial) stock is believed to be fairly valued. The company's financial condition is fair, and its profitability is strong. Its growth ranks better than 50.39% of 258 companies in the Retail - Defensive industry. To learn more about The Kroger Co stock, you can check out its 30-Year Financials here.
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