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Kroger Co Stock Buy Recommendation Reiterated (KR)

Editor's Note: TheStreet ratings do not represent the views of TheStreet's staff or its contributors. Ratings are established by computer based on metrics for performance (which includes growth, stock performance, efficiency and valuation) and risk (volatility and solvency). Companies with poor cash flow or high debt levels tend to earn lower ratings in our model.

NEW YORK ( TheStreet) -- Kroger (NYSE: KR) has been reiterated by TheStreet Ratings as a buy with a ratings score of B+ . The company's strengths can be seen in multiple areas, such as its revenue growth, increase in net income, good cash flow from operations, increase in stock price during the past year and growth in earnings per share. We feel these strengths outweigh the fact that the company shows low profit margins.

  • EXCLUSIVE OFFER: Jim Cramer's Protégé, Dave Peltier, only buys Stocks Under $10 that he thinks could potentially double. See what he's trading today with a 14-day FREE pass

Highlights from the ratings report include:

  • KR's revenue growth has slightly outpaced the industry average of 5.8%. Since the same quarter one year prior, revenues slightly increased by 5.9%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Food & Staples Retailing industry. The net income increased by 61.7% when compared to the same quarter one year prior, rising from $196.00 million to $317.00 million.
  • Net operating cash flow has slightly increased to $235.00 million or 8.29% when compared to the same quarter last year. Despite an increase in cash flow, KROGER CO's cash flow growth rate is still lower than the industry average growth rate of 26.77%.
  • Compared to where it was a year ago today, the stock is now trading at a higher level, reflecting both the market's overall trend during that period and the fact that the company's earnings growth has been robust. The stock's price rise over the last year has driven it to a level which is somewhat expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
  • KROGER CO reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, KROGER CO reported lower earnings of $0.95 versus $1.75 in the prior year. This year, the market expects an improvement in earnings ($2.41 versus $0.95).

The Kroger Co., together with its subsidiaries, operates as a retailer in the United States. The company also manufactures and processes food for sale in its supermarkets. Kroger has a market cap of $13.85 billion and is part of the services sector and retail industry. The company has a P/E ratio of 20.7, above the S&P 500 P/E ratio of 17.7. Shares are up 8.4% year to date as of the close of trading on Friday.

You can view the full Kroger Ratings Report or get investment ideas from our investment research center.

--Written by a member of TheStreet Ratings Staff.

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