An excellent return on equity, a strengthening of its private label portfolio, and investment in e-commerce make for a nice defensive play. Is it the right time to shop?
Long Trade Idea
Enter your long position between $64.15 (the lower band of its horizontal support zone) and $66.34 (the upper band of its horizontal support zone).
Market Index Analysis
- The Kroger Company (KR) is a member of the S&P 500 index.
- This index continues to climb a wall of worry in a bump-and-run reversal pattern.
- The Bull Bear Power Indicator for the S&P 500 shows a negative divergence and does not confirm the uptrend.
Market Sentiment Analysis
Equity markets paused their bubble rally yesterday after comments by Federal Reserve Chairman Powell cautioned that the central bank has no risk-free path. The labor market has deteriorated, while core inflation remains stubborn. Therefore, last week’s interest rate cut may have strengthened the case of stagflation, the worst economic condition. NVIDIA’s $100 billion investment announcement in OpenAI also raised concerns about a circular economy focused on AI, another red flag for the economy. Futures show a rebound this morning, but volatility should persist until Friday’s inflation reading.
The Kroger Company Fundamental Analysis
The Kroger Company is the largest US supermarket operator by revenue, the fifth-largest retailer, and one of the largest American-owned private employers. It operates over 2,700 stores across 35 states, including pharmacies, 220+ ‘The Little Clinic’ in-store medical clinics, and 33 manufacturing plants.
So, why am I bullish on KR despite its double-digit sell-off during a bull market?
As a retailer, the Kroger Company will not impress with blockbuster numbers, but it delivers excellent profits by retail standards. Valuations are low, and the PEG ratio confirms incredible upside potential. I am also buying into its e-commerce modernization. It should increase its reach above the eleven million daily shoppers it currently serves. While the dividend yield is nothing to get excited over at just above 2.0%, its share buybacks add tremendous value to long-term shareholders.
Metric | Value | Verdict |
P/E Ratio | 16.59 | Bullish |
P/B Ratio | 4.67 | Bearish |
PEG Ratio | 1.54 | Bullish |
Current Ratio | 0.95 | Bearish |
ROIC-WACC Ratio | Positive | Bullish |
The Kroger Company Fundamental Analysis Snapshot
The price-to-earnings (P/E) ratio of 16.59 makes KR an inexpensive stock. By comparison, the P/E ratio for the S&P 500 is 29.92.
The average analyst price target for KR is $76.27. It suggests decent upside potential, with reasonable downside risks.
The Kroger Company Technical Analysis
Today’s KR Signal
Kroger Company Price Chart
- The KR D1 chart shows price action inside its horizontal support zone.
- It also shows price action trading between its descending 0.0% and 38.2% Fibonacci Retracement Fan levels.
- The Bull Bear Power Indicator is bearish, but a positive divergence has formed.
- The average bullish trading volumes are lower than the average bearish trading volumes but are nearing a bearish wash-out at core support levels.
- KR moved lower while the S&P 500 grinds higher, a bearish signal, but this stock experiences ongoing accumulation of bullish pressures.
My Call on the Kroger Company
I am taking a long position in KR between $64.15 and $66.34. I like the current valuations, return on equity, and revenue generation at the Kroger Company. I am also upbeat about its e-commerce modernization and its defensive portfolio capabilities.
- KR Entry Level: Between $64.15 and $66.34
- KR Take Profit: Between $74.90 and $76.27
- KR Stop Loss: Between $58.95 and $60.42
- Risk/Reward Ratio: 2.07
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