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How Does Kroger Stock Compare to Peers?

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Nov. 30 2016, Updated 8:05 a.m. ET

Comparing stock market performance of Kroger with peers

Kroger (KR) and supermarket peers Whole Foods Market (WFM), Sprouts Farmers Market (SFM), and Supervalu (SVU) have delivered unimpressive performances in the stock market this year. All the companies are sitting on YTD losses. Investors seem to be bothered by persistent deflation in the grocery sector.

In comparison, mass merchandisers Walmart (WMT) and Target (TGT), and discount retailers Dollar General (DG) and Dollar Tree (DLTR) have done fairly well this year. While deflation is a headwind for these retailers as well, a more diversified portfolio helps to negate some of the negative impact.

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Comparing Kroger’s Wall Street recommendations with peers

Kroger is covered by 25 Wall Street analysts, who have jointly rated the stock a 2.2 on a scale of one (strong buy) to five (sell). The company has a better rating than Whole Foods and Supervalu, which are rated 3.2 and 2.6, respectively. Sprouts, however, has a better rating of 2.1.

Of the 25 analysts who have rated Kroger, 60% have recommended a “buy,” 28% have recommended a “hold,” and only 12% have given a “sell” rating. In comparison, none of the analysts have recommended a “sell” for Supervalu and Sprouts.

Comparing target prices and upside potential

Kroger is currently trading at $33.66, ~27% below its 52-week high price. Analysts expect the company’s stock price to touch $35.91 over the next 12 months, an upside potential of ~7%.

Supervalu and Sprouts have better upsides attached. Stock prices of these two companies are predicted to rise 28% and 14%, respectively, based on the Wall Street target prices.

Comparing valuations

Kroger is currently trading at a one-year forward price-to-earnings ratio of 15.6x, operating closer to the lower end of its 52-week PE (price-to-earnings) range of 13.4x to 19.6x.

The company continues to operate at a discount to Whole Foods and Sprouts, which are valued at 21.4x and 23x. The company is also cheaper compared to mass merchandisers Walmart (WMT) and Costco (COST). The two companies trade at 16.6x and 25.5x, respectively

Together, Kroger, Supervalu, Whole Foods, and Sprouts make up ~4.9% of the portfolio holdings of the SPDR S&P Retail ETF (XRT). XRT has exposure to about 100 stocks in the retail sector.

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