Is Kroger Stock Undervalued or Overvalued Today?

by Rob Otman
kroger-stock-kroger-earnings-0

Kroger (NYSE: KR) is a large cap company that operates within the food and staples retailing industry. Its market cap is $29 billion today, and the total one-year return is -14.6% for shareholders.

Kroger stock is underperforming the market. It's beaten down, but it reports earnings on Thursday. So is it a good time to buy? To answer this question, we've turned to the Investment U Stock Grader. Our Research Team built this system to diagnose the financial health of a company.

Our system looks at six key metrics...

Earnings-per-Share (EPS) Growth: Kroger reported a recent EPS growth rate of -5.26%. That's below the food and staples retailing industry average of 11.84%. That's not a good sign. We like to see companies that have higher earnings growth.

Price-to-Earnings (P/E): The average price-to-earnings ratio of the food and staples retailing industry is 33.75. And Kroger's ratio comes in at 14.44. It's trading at a better value than many of its competitors.

Debt-to-Equity : The debt-to-equity ratio for Kroger stock is 209.79. That's above the food and staples retailing industry average of 63.85. That's not a good sign. Kroger's debt levels should be lower. 

Free Cash Flow per Share Growth Kroger's FCF has been higher than that of its competitors over the last year. That's good for investors. In general, if a company is growing its FCF, it will be able to pay down debt, buy back stock, pay out more in dividends and/or invest money back into the business to help boost growth. It's one of our most important fundamental factors.

Profit Margins The profit margin of Kroger comes in at 1.83% today. And generally, the higher, the better. We also like to see this margin above that of its competitors. Kroger's profit margin is below the food and staples retailing average of 2.84%. So that's a negative indicator for investors.

Return on Equity Return on equity gives us a look at the amount of net income returned to shareholders. The ROE for Kroger is 29%, and that's above its industry average ROE of 15.93%.

Kroger stock passes three of our six key metrics today. That's why our Investment U Stock Grader rates it as a Hold.

kroger-stock-kroger-earnings-2

Please note that our fundamental factor checklist is just the first step in performing your own due diligence. There are many other factors you should consider before investing. That's why The Oxford Club offers more than a dozen newsletters and trading advisories all aimed at helping investors grow and maintain their wealth. For more details, click here.

IU Stock Grader