The Kroger Co (KR, Financial) has recently been in the spotlight, drawing interest from investors and financial analysts due to its robust financial stance. With shares currently priced at $47.64, The Kroger Co has witnessed a daily gain of 1.64%, marked against a three-month change of 12.39%. A thorough analysis, underlined by the GF Score, suggests that The Kroger Co is well-positioned for substantial growth in the near future.
What Is the GF Score?
The GF Score is a stock performance ranking system developed by GuruFocus using five aspects of valuation, which has been found to be closely correlated to the long-term performances of stocks by backtesting from 2006 to 2021. The stocks with a higher GF Score generally generate higher returns than those with a lower GF Score. Therefore, when picking stocks, investors should invest in companies with high GF Scores. The GF Score ranges from 0 to 100, with 100 as the highest rank.
- Financial strength rank: 6/10
- Profitability rank: 9/10
- Growth rank: 9/10
- GF Value rank: 5/10
- Momentum rank: 8/10
Each one of these components is ranked and the ranks also have positive correlation with the long term performances of stocks. The GF score is calculated using the five key aspects of analysis. Through backtesting, we know that each of these key aspects has a different impact on the stock price performance. Thus, they are weighted differently when calculating the total score. With high ranks in profitability and growth, and a solid momentum rank, GuruFocus assigned The Kroger Co the GF Score of 92 out of 100, which signals the highest outperformance potential.
Understanding The Kroger Co Business
The Kroger Co, with a market cap of $34.27 billion and sales of $147.8 billion, is the leading U.S. grocer, operating 2,719 supermarkets under various banners across the country. With an operating margin of 1.86%, the company boasts a significant presence in the retail sector, with around 83% of its stores housing pharmacies and nearly 60% offering fuel services. The company also operates approximately 120 fine jewelry stores and is a major player in private-label products, manufacturing a substantial portion of its own-brand units in 33 food production plants nationwide. As a top-two grocer in most of its major markets, The Kroger Co's sales are predominantly from the United States. The company's proposed $25 billion acquisition of Albertsons is set to further solidify its market position, pending regulatory approval with a projected closing in 2024.
Financial Strength Breakdown
According to the Financial Strength rating, The Kroger Co's robust balance sheet exhibits resilience against financial volatility, reflecting prudent management of capital structure. The Interest Coverage ratio for The Kroger Co stands impressively at 6.08, underscoring its strong capability to cover its interest obligations. This robust financial position resonates with the wisdom of legendary investor Benjamin Graham, who favored companies with an interest coverage ratio of at least 5. With a favorable Debt-to-Revenue ratio of 0.13, The Kroger Co's strategic handling of debt solidifies its financial health.
Profitability Rank Breakdown
The Profitability Rank shows The Kroger Co's impressive standing among its peers in generating profit. The company's Operating Margin has increased over the past five years, indicating a trend of growing profitability. The Piotroski F-Score confirms The Kroger Co's solid financial situation based on Joseph Piotroski's nine-point scale, which measures a company's profitability, funding and operating efficiency. The Kroger Co's strong Predictability Rank of 5.0 stars out of five underscores its consistent operational performance, providing investors with increased confidence.
Growth Rank Breakdown
Ranked highly in Growth, The Kroger Co demonstrates a strong commitment to expanding its business. The company's 3-Year Revenue Growth Rate is 10.3%, which outperforms better than 68.4% of companies in the Retail - Defensive industry. Moreover, The Kroger Co has seen a robust increase in its earnings before interest, taxes, depreciation, and amortization (EBITDA) over the past few years. Specifically, the three-year growth rate stands at 9.8, and the rate over the past five years is 9.9. This trend accentuates the company's continued capability to drive growth.
Conclusion: The Kroger Co's Path to Outperformance
Considering The Kroger Co's financial strength, profitability, and growth metrics, the GF Score highlights the firm's unparalleled position for potential outperformance. The company's strategic initiatives, consistent operational performance, and robust financial health paint a promising picture for investors. With a GF Score of 92, The Kroger Co stands as a compelling investment opportunity for those seeking to capitalize on market leadership and financial growth.
GuruFocus Premium members can find more companies with strong GF Scores using the following screener link: GF Score Screen
This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
