The Kroger Co (KR, Financial) recently reported a daily loss of 2.74% and a 3-month gain of 0.7%. With an Earnings Per Share (EPS) (EPS) of 3.49, the question arises: is this stock fairly valued? This article aims to provide an in-depth analysis of The Kroger Co's valuation, financial strength, profitability, and growth. We invite you to join us on this exploration.
The Kroger Co: A Snapshot
The Kroger Co, the leading American grocer, operates 2,719 supermarkets across the United States. With around 83% of its stores housing pharmacies and nearly 60% selling fuel, Kroger has positioned itself as a dominant player in the retail industry. The company's private-label offering is impressive, with around 30% of its own-brand units produced in-house in 33 food production plants nationwide. The company has proposed a $25 billion deal to acquire Albertsons, a move that is expected to close in 2024, pending regulatory approval.
Understanding The Kroger Co's GF Value
The GF Value is a proprietary measure calculated based on historical multiples, GuruFocus adjustment factor, and future business performance estimates. It represents the intrinsic value of a stock and provides an overview of the fair value at which the stock should ideally trade. If the stock price significantly deviates from the GF Value Line, it could indicate overvaluation or undervaluation, affecting its future returns.
The Kroger Co's stock, currently priced at $45.66 per share, is believed to be fairly valued with a market cap of $32.80 billion. This suggests that 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 expose investors to a high risk of permanent capital loss. Therefore, it's crucial to review a company's financial strength before purchasing shares. The Kroger Co's cash-to-debt ratio of 0.19 ranks worse than 66.45% of 307 companies in the Retail - Defensive industry, indicating that its financial strength is fair.
Profitability and Growth of The Kroger Co
Investing in profitable companies, especially those with consistent profitability over the long term, is generally less risky. The Kroger Co has been profitable 10 over the past 10 years. Its operating margin of 2.75% ranks worse than 55.88% of 306 companies in the Retail - Defensive industry. However, its overall profitability is ranked 9 out of 10, indicating strong profitability.
Growth is probably the most important factor in the valuation of a company. The Kroger Co's 3-year average annual revenue growth of 10.3% ranks better than 69.31% of 290 companies in the Retail - Defensive industry, and its 3-year average EBITDA growth rate is 9.8%.
Another method of determining the profitability of a company is to compare its return on invested capital (ROIC) to the weighted average cost of capital (WACC). When the ROIC is higher than the WACC, it implies the company is creating value for shareholders. The Kroger Co's ROIC is 6.95, and its WACC is 6.31.
Conclusion
In summary, The Kroger Co's 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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