Kroger Company shares fell by -1.1% during the day's afternoon session, and are now trading at a price of $46.93. Is it time to buy the dip? To better answer that question, it's essential to check if the market is valuing the company's shares fairly in terms of its earnings and equity levels.
A Lower P/B Ratio Than Its Sector Average but Trades Above Its Graham Number:
The Kroger Co. operates as a food and drug retailer in the United States. The company belongs to the Consumer Staples sector, which has an average price to earnings (P/E) ratio of 24.36 and an average price to book (P/B) ratio of 4.29. In contrast, Kroger Company has a trailing 12 month P/E ratio of 13.4 and a P/B ratio of 3.1.
Kroger Company's PEG ratio is 1.31, which shows that the stock is probably overvalued in terms of its estimated growth. For reference, a PEG ratio near or below 1 is a potential signal that a company is undervalued.
Growing Revenues With a Flat Capital Expenditure Trend:
| 2020-01-31 | 2021-01-31 | 2022-01-31 | 2023-01-31 | |
|---|---|---|---|---|
| Revenue (MM) | $122,286 | $132,498 | $137,888 | $148,258 |
| Gross Margins | 22.1% | 23.3% | 22.0% | 21.4% |
| Operating Margins | 1.8% | 2.1% | 2.5% | 2.8% |
| Net Margins | 1.36% | 1.95% | 1.2% | 1.51% |
| Net Income (MM) | $1,659 | $2,585 | $1,655 | $2,244 |
| Net Interest Expense (MM) | -603 | -544 | -571 | -535 |
| Net Interest Expense (MM) | -$603 | -$544 | -$571 | -$535 |
| Depreciation & Amort. (MM) | -$3,289 | -$3,373 | -$3,429 | -$3,579 |
| Earnings Per Share | $2.04 | $3.27 | $2.17 | $3.49 |
| EPS Growth | n/a | 60.29% | -33.64% | 60.83% |
| Diluted Shares (MM) | 805 | 781 | 754 | 718 |
| Free Cash Flow (MM) | $1,536 | $3,950 | $3,576 | $1,233 |
| Capital Expenditures (MM) | -$3,128 | -$2,865 | -$2,614 | -$3,078 |
| Net Current Assets (MM) | -$25,715 | -$26,609 | -$27,483 | -$26,939 |
| Current Ratio | 0.77 | 0.81 | 0.75 | 0.76 |
| Long Term Debt (MM) | $12,136 | $12,502 | $12,809 | $12,571 |
| Net Debt / EBITDA | 2.37 | 1.7 | 2.02 | 1.88 |
Kroger Company has growing revenues and a flat capital expenditure trend, wider gross margins than its peer group, and average operating margins with a positive growth rate. The company also benefits from a strong EPS growth trend, generally positive cash flows, and healthy leverage.
