KR

Navigating Kroger – A Brief Overview for Investors

Kroger shares fell by -1.9% during the day's morning session, and are now trading at a price of $53.84. 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.

an Increase in Expected Earnings Improves Its Value Outlook but Its Shares Are Expensive:

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 22.08 and an average price to book (P/B) ratio of 3.05. In contrast, Kroger has a trailing 12 month P/E ratio of 18.4 and a P/B ratio of 4.36.

Kroger's PEG ratio is 1.52, 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.

The Firm Has a Declining EPS Growth Trend:

2018 2019 2020 2021 2022 2023
Revenue (M) $121,852 $122,286 $132,498 $137,888 $148,258 $150,039
Gross Margins 22% 22% 23% 22% 21% 22%
Net Margins 3% 1% 2% 1% 2% 1%
Net Income (M) $3,110 $1,659 $2,585 $1,655 $2,244 $2,164
Net Interest Expense (M) $620 $603 $544 $571 $535 $441
Depreciation & Amort. (M) $2,465 $2,649 $2,747 $2,824 $2,965 $3,125
Diluted Shares (M) 807 780 752 724 725 725
Earnings Per Share $3.85 $2.13 $3.44 $2.29 $3.1 $2.98
EPS Growth n/a -44.68% 61.5% -33.43% 35.37% -3.87%
Avg. Price $25.01 $23.3 $30.3 $37.5 $50.02 $53.84
P/E Ratio 6.41 10.94 8.81 16.38 15.98 17.95
Free Cash Flow (M) $1,197 $1,536 $3,950 $3,576 $1,420 $2,884
CAPEX (M) $2,967 $3,128 $2,865 $2,614 $3,078 $3,904
EV / EBITDA 6.94 5.83 6.09 6.04 6.51 7.61
Total Debt (M) $15,835 $12,629 $13,149 $11,869 $12,005 $10,385
Net Debt / EBITDA 3.01 2.13 1.97 1.74 1.45 1.37
Current Ratio 0.78 0.83 0.8 0.76 0.8 0.81

Kroger has growing revenues and increasing reinvestment in the business, generally positive cash flows, and healthy leverage levels. However, Kroger has slimmer gross margins than its peers, declining EPS growth, and not enough current assets to cover current liabilities because its current ratio is 0.81.

The above analysis is intended for educational purposes only and was performed on the basis of publicly available data. It is not to be construed as a recommendation to buy or sell any security. Any buy, sell, or other recommendations mentioned in the article are direct quotations of consensus recommendations from the analysts covering the stock, and do not represent the opinions of Market Inference or its writers. Past performance, accounting data, and inferences about market position and corporate valuation are not reliable indicators of future price movements. Market Inference does not provide financial advice. Investors should conduct their own review and analysis of any company of interest before making an investment decision.

IN FOCUS