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How Wall Street Views Kroger

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Wall Street’s view of Kroger

In this final part of the series, we’ll look at Wall Street’s recommendations and current valuations of Kroger (KR). Kroger is covered by 26 Wall Street analysts, who have jointly rated the stock a 2.2 on a scale of 1.0 (strong buy) to 5.0 (sell). 

The company has a better rating than larger competitors Walmart (WMT) (2.3), Target (TGT) (2.6), and SuperValu (SVU) (2.8). Costco (COST) and Dollar Tree (DLTR) have better ratings of 2.0 each.

Of the 26 analysts rating Kroger, 46.0% recommended a “buy,” and 54.0% recommended a “hold” on the stock. There were no “sell” recommendations on the company. In comparison, 42.0% of analysts recommended buying Walmart, while none of them suggested selling its stock. Costco and Dollar Tree didn’t garner any “sell” recommendations.

Comparing target prices and gain potential

Kroger is currently trading at $26.16, ~20.0% below its 52-week high price. Analysts expect the company’s stock price to touch $27.75 over the next 12 months. This indicates an upside potential of ~6.0%.

Walmart and Dollar Tree have even better upsides. Their stock prices are projected to rise 14.0% and 18.0%, respectively, over the next year.

Comparing valuations

Kroger (KR) is currently trading at a one-year forward-price-to-earnings ratio of 12.6x versus a three-year average of 15.0x. The company is not only cheaper historically but also trades at a discount to Walmart (17.0x), Costco (27.0x), and Dollar Tree (15.3x).

While Kroger trades at a discount, it also has weaker earnings potential. Kroger’s earnings are projected to rise about 1.7% over the next 12 months (or NTM). In comparison, Walmart, Dollar Tree, and Costco are expected to increase their NTM EPS by 6.8%, 13.3%, and 14.0%, respectively.

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