Kroger (KR) Is Water-Logged And Getting Wetter Today

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

Trade-Ideas LLC identified Kroger ( KR) as a "water-logged and getting wetter" (weak stocks crossing below support with today's range greater than 200%) candidate. In addition to specific proprietary factors, Trade-Ideas identified Kroger as such a stock due to the following factors:

  • KR has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $118.5 million.
  • KR has traded 1.6 million shares today.
  • KR traded in a range 233.8% of the normal price range with a price range of $1.32.
  • KR traded below its daily resistance level (quality: 8 days, meaning that the stock is crossing a resistance level set by the last 8 calendar days. The resistance price is defined by the Price - $0.01 at the time of the signal).

Stocks matching the 'Water-Logged and Getting Wetter' criteria are worthwhile stocks to watch for a variety of factors including historical back testing and volatility. Trade-Ideas targets these opportunities because the stock is exhibiting an unusual behavior while displaying negative price action. In this case, the stock crossed an important inflection point; namely, "support" while at the same time the range of the stock's movement in price is twice its normal size. This large range foreshadows a possible continuation as the stock moves lower.

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More details on KR:

The Kroger Co., together with its subsidiaries, operates as a retailer worldwide. The company also manufactures and processes food for sale in its supermarkets. It operates retail food and drug stores, multi-department stores, jewelry stores, and convenience stores. The stock currently has a dividend yield of 1.3%. KR has a PE ratio of 17.5. Currently there are 9 analysts that rate Kroger a buy, no analysts rate it a sell, and 6 rate it a hold.

The average volume for Kroger has been 2.7 million shares per day over the past 30 days. Kroger has a market cap of $25.3 billion and is part of the services sector and retail industry. The stock has a beta of 1.00 and a short float of 2.8% with 3.84 days to cover. Shares are up 31.2% year-to-date as of the close of trading on Wednesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Kroger as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, solid stock price performance, growth in earnings per share, increase in net income and good cash flow from operations. We feel these strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated.

Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 3.3%. Since the same quarter one year prior, revenues slightly increased by 9.9%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 38.85% over the past year, a rise that has exceeded that of the S&P 500 Index. Regarding the stock's future course, although almost any stock can fall in a broad market decline, KR should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • KROGER CO has improved earnings per share by 6.5% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, KROGER CO increased its bottom line by earning $2.90 versus $2.77 in the prior year. This year, the market expects an improvement in earnings ($3.28 versus $2.90).
  • The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and the Food & Staples Retailing industry average. The net income increased by 4.2% when compared to the same quarter one year prior, going from $481.00 million to $501.00 million.
  • Net operating cash flow has increased to $1,780.00 million or 10.08% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -14.71%.

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