Wall Street’s view on SVU
Supervalu (SVU) is covered by 11 Wall Street analysts, who have jointly rated the stock a 2.6 on a scale of one (strong buy) to five (sell). In comparison, Whole Foods Market (WFM), Sprouts Farmers Market (SFM), and Kroger (KR) are rated 3.2, 2.1, and 2.2, respectively.
18% of the analysts have recommended a “buy” on Supervalu’s stock while the remaining 82% have recommended a “hold.” There is no “sell” recommendation.
Analysts seem to be quite positive on Kroger and Sprouts Farmers Market. 56% and 65% of analysts covering the stocks recommend a “buy,” respectively.
A look at Supervalu’s valuations
Supervalu is currently trading 9.3x its next-12-month earnings, as of January 5, 2017. It’s currently operating at the upper end of its 52-week PE range. Despite the surge in valuations, it continues to be cheaper than Kroger, Sprouts Farmers Market, and Whole Foods Market, which are trading at 15.5x, 21.4x, and 21.1x to next-12-month earnings, respectively.
Supervalu is included in the holdings of the SPDR S&P Retail ETF (XRT) along with supermarket peers Kroger, Sprouts Farmers Market, and Whole Foods Market. Together, they account for 6.5% of the portfolio holdings.
Despite unimpressive top-line growth (three-year CAGR of 0.8%), Supervalu’s earnings have grown at a decent rate. EPS (earnings per share) rose 5.6% YoY (year-over-year) in fiscal 2016 after having increased 24% in fiscal 2015.
However, like other supermarkets, Supervalu has a muted earnings outlook for the current fiscal year. Earnings per share are expected to fall 5.6% during fiscal 2017.
Investors looking to add exposure to Supervalu through ETFs can invest in the iShares Morningstar Small-Cap Value ETF (JKL), which invests ~0.23% of its portfolio in SVU.