Investors with an interest in Retail - Supermarkets stocks have likely encountered both Kroger (NYSE:KR) and Walmart (NYSE:WMT). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. The proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Right now, both Kroger and Walmart are sporting a Zacks Rank of # 2 (Buy). Investors should feel comfortable knowing that both of these stocks have an improving earnings outlook since the Zacks Rank favors companies that have witnessed positive analyst estimate revisions. But this is just one factor that value investors are interested in.
Value investors also tend to look at a number of traditional, tried-and-true figures to help them find stocks that they believe are undervalued at their current share price levels.
The Value category of the Style Scores system identifies undervalued companies by looking at a number of key metrics. These include the long-favored P/E ratio, P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that help us determine a company's fair value.
KR currently has a forward P/E ratio of 10.05, while WMT has a forward P/E of 26.08. We also note that KR has a PEG ratio of 1.59. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. WMT currently has a PEG ratio of 4.74.
Another notable valuation metric for KR is its P/B ratio of 2.60. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. For comparison, WMT has a P/B of 4.68.
These metrics, and several others, help KR earn a Value grade of A, while WMT has been given a Value grade of C.
Both KR and WMT are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that KR is the superior value option right now.
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The Kroger Co. (KR): Free Stock Analysis Report
Walmart Inc. (WMT): Free Stock Analysis Report
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