Intrinsic value of Kroger - KR

Previous Close

$20.44

  Intrinsic Value

$29.50

stock screener

  Rating & Target

buy

+44%

  Value-price divergence*

-41%

Previous close

$20.44

 
Intrinsic value

$29.50

 
Up/down potential

+44%

 
Rating

buy

 
Value-price divergence*

-41%

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of KR stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2017), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 18.9

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2017(a)
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046
   2047

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  5.01
  4.90
  4.91
  4.92
  4.93
  4.93
  4.94
  4.95
  4.95
  4.96
  4.96
  4.97
  4.97
  4.97
  4.97
  4.98
  4.98
  4.98
  4.98
  4.98
  4.99
  4.99
  4.99
  4.99
  4.99
  4.99
  4.99
  4.99
  4.99
  4.99
  5.00
Revenue, $m
  115,337
  120,989
  126,929
  133,173
  139,734
  146,629
  153,874
  161,486
  169,483
  177,884
  186,710
  195,980
  205,718
  215,945
  226,688
  237,970
  249,820
  262,264
  275,334
  289,059
  303,473
  318,610
  334,506
  351,198
  368,727
  387,134
  406,463
  426,759
  448,073
  470,453
  493,953
Variable operating expenses, $m
 
  116,981
  122,710
  128,731
  135,059
  141,708
  148,695
  156,036
  163,748
  171,850
  180,361
  188,998
  198,388
  208,252
  218,611
  229,492
  240,919
  252,920
  265,524
  278,761
  292,661
  307,259
  322,588
  338,685
  355,590
  373,341
  391,981
  411,555
  432,109
  453,691
  476,355
Fixed operating expenses, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total operating expenses, $m
  111,901
  116,981
  122,710
  128,731
  135,059
  141,708
  148,695
  156,036
  163,748
  171,850
  180,361
  188,998
  198,388
  208,252
  218,611
  229,492
  240,919
  252,920
  265,524
  278,761
  292,661
  307,259
  322,588
  338,685
  355,590
  373,341
  391,981
  411,555
  432,109
  453,691
  476,355
Operating income, $m
  3,436
  4,007
  4,219
  4,442
  4,675
  4,921
  5,179
  5,450
  5,735
  6,035
  6,349
  6,982
  7,329
  7,694
  8,076
  8,478
  8,901
  9,344
  9,810
  10,299
  10,812
  11,351
  11,918
  12,512
  13,137
  13,793
  14,481
  15,205
  15,964
  16,761
  17,599
EBITDA, $m
  5,776
  6,474
  6,792
  7,126
  7,478
  7,847
  8,234
  8,642
  9,069
  9,519
  9,991
  10,487
  11,008
  11,556
  12,131
  12,734
  13,368
  14,034
  14,734
  15,468
  16,240
  17,050
  17,900
  18,794
  19,732
  20,717
  21,751
  22,837
  23,978
  25,175
  26,433
Interest expense (income), $m
  505
  536
  593
  652
  714
  780
  848
  921
  997
  1,076
  1,160
  1,248
  1,340
  1,438
  1,540
  1,647
  1,759
  1,877
  2,001
  2,132
  2,269
  2,412
  2,563
  2,722
  2,888
  3,063
  3,246
  3,439
  3,641
  3,854
  4,077
Earnings before tax, $m
  2,914
  3,471
  3,626
  3,790
  3,961
  4,141
  4,331
  4,530
  4,739
  4,958
  5,189
  5,734
  5,989
  6,256
  6,537
  6,832
  7,141
  7,467
  7,808
  8,167
  8,544
  8,939
  9,355
  9,791
  10,249
  10,730
  11,235
  11,766
  12,322
  12,907
  13,522
Tax expense, $m
  957
  937
  979
  1,023
  1,069
  1,118
  1,169
  1,223
  1,279
  1,339
  1,401
  1,548
  1,617
  1,689
  1,765
  1,845
  1,928
  2,016
  2,108
  2,205
  2,307
  2,414
  2,526
  2,644
  2,767
  2,897
  3,033
  3,177
  3,327
  3,485
  3,651
Net income, $m
  1,975
  2,534
  2,647
  2,766
  2,892
  3,023
  3,161
  3,307
  3,459
  3,620
  3,788
  4,186
  4,372
  4,567
  4,772
  4,987
  5,213
  5,451
  5,700
  5,962
  6,237
  6,526
  6,829
  7,147
  7,482
  7,833
  8,202
  8,589
  8,995
  9,422
  9,871

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  322
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  36,505
  37,951
  39,815
  41,773
  43,831
  45,994
  48,267
  50,654
  53,163
  55,798
  58,566
  61,474
  64,529
  67,737
  71,107
  74,646
  78,363
  82,266
  86,366
  90,671
  95,192
  99,940
  104,926
  110,162
  115,661
  121,435
  127,498
  133,864
  140,550
  147,570
  154,941
Adjusted assets (=assets-cash), $m
  36,183
  37,951
  39,815
  41,773
  43,831
  45,994
  48,267
  50,654
  53,163
  55,798
  58,566
  61,474
  64,529
  67,737
  71,107
  74,646
  78,363
  82,266
  86,366
  90,671
  95,192
  99,940
  104,926
  110,162
  115,661
  121,435
  127,498
  133,864
  140,550
  147,570
  154,941
Revenue / Adjusted assets
  3.188
  3.188
  3.188
  3.188
  3.188
  3.188
  3.188
  3.188
  3.188
  3.188
  3.188
  3.188
  3.188
  3.188
  3.188
  3.188
  3.188
  3.188
  3.188
  3.188
  3.188
  3.188
  3.188
  3.188
  3.188
  3.188
  3.188
  3.188
  3.188
  3.188
  3.188
Average production assets, $m
  21,421
  22,504
  23,609
  24,770
  25,991
  27,273
  28,621
  30,036
  31,524
  33,086
  34,728
  36,452
  38,263
  40,166
  42,164
  44,262
  46,466
  48,781
  51,212
  53,765
  56,446
  59,261
  62,218
  65,323
  68,583
  72,007
  75,602
  79,377
  83,341
  87,504
  91,875
Working capital, $m
  -2,520
  -605
  -635
  -666
  -699
  -733
  -769
  -807
  -847
  -889
  -934
  -980
  -1,029
  -1,080
  -1,133
  -1,190
  -1,249
  -1,311
  -1,377
  -1,445
  -1,517
  -1,593
  -1,673
  -1,756
  -1,844
  -1,936
  -2,032
  -2,134
  -2,240
  -2,352
  -2,470
Total debt, $m
  14,077
  15,200
  16,719
  18,315
  19,993
  21,755
  23,607
  25,553
  27,598
  29,745
  32,002
  34,372
  36,861
  39,476
  42,222
  45,106
  48,135
  51,317
  54,658
  58,167
  61,852
  65,721
  69,785
  74,052
  78,534
  83,239
  88,181
  93,369
  98,818
  104,539
  110,547
Total liabilities, $m
  29,807
  30,930
  32,449
  34,045
  35,723
  37,485
  39,337
  41,283
  43,328
  45,475
  47,732
  50,102
  52,591
  55,206
  57,952
  60,836
  63,865
  67,047
  70,388
  73,897
  77,582
  81,451
  85,515
  89,782
  94,264
  98,969
  103,911
  109,099
  114,548
  120,269
  126,277
Total equity, $m
  6,698
  7,021
  7,366
  7,728
  8,109
  8,509
  8,929
  9,371
  9,835
  10,323
  10,835
  11,373
  11,938
  12,531
  13,155
  13,809
  14,497
  15,219
  15,978
  16,774
  17,611
  18,489
  19,411
  20,380
  21,397
  22,465
  23,587
  24,765
  26,002
  27,300
  28,664
Total liabilities and equity, $m
  36,505
  37,951
  39,815
  41,773
  43,832
  45,994
  48,266
  50,654
  53,163
  55,798
  58,567
  61,475
  64,529
  67,737
  71,107
  74,645
  78,362
  82,266
  86,366
  90,671
  95,193
  99,940
  104,926
  110,162
  115,661
  121,434
  127,498
  133,864
  140,550
  147,569
  154,941
Debt-to-equity ratio
  2.102
  2.160
  2.270
  2.370
  2.470
  2.560
  2.640
  2.730
  2.810
  2.880
  2.950
  3.020
  3.090
  3.150
  3.210
  3.270
  3.320
  3.370
  3.420
  3.470
  3.510
  3.550
  3.600
  3.630
  3.670
  3.710
  3.740
  3.770
  3.800
  3.830
  3.860
Adjusted equity ratio
  0.176
  0.185
  0.185
  0.185
  0.185
  0.185
  0.185
  0.185
  0.185
  0.185
  0.185
  0.185
  0.185
  0.185
  0.185
  0.185
  0.185
  0.185
  0.185
  0.185
  0.185
  0.185
  0.185
  0.185
  0.185
  0.185
  0.185
  0.185
  0.185
  0.185
  0.185

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  1,975
  2,534
  2,647
  2,766
  2,892
  3,023
  3,161
  3,307
  3,459
  3,620
  3,788
  4,186
  4,372
  4,567
  4,772
  4,987
  5,213
  5,451
  5,700
  5,962
  6,237
  6,526
  6,829
  7,147
  7,482
  7,833
  8,202
  8,589
  8,995
  9,422
  9,871
Depreciation, amort., depletion, $m
  2,340
  2,467
  2,573
  2,685
  2,802
  2,926
  3,055
  3,191
  3,334
  3,484
  3,642
  3,505
  3,679
  3,862
  4,054
  4,256
  4,468
  4,690
  4,924
  5,170
  5,428
  5,698
  5,983
  6,281
  6,595
  6,924
  7,269
  7,632
  8,014
  8,414
  8,834
Funds from operations, $m
  3,794
  5,001
  5,220
  5,451
  5,694
  5,949
  6,216
  6,498
  6,793
  7,104
  7,430
  7,691
  8,051
  8,429
  8,826
  9,243
  9,681
  10,141
  10,624
  11,132
  11,664
  12,224
  12,811
  13,428
  14,076
  14,757
  15,471
  16,221
  17,009
  17,836
  18,705
Change in working capital, $m
  -478
  -28
  -30
  -31
  -33
  -34
  -36
  -38
  -40
  -42
  -44
  -46
  -49
  -51
  -54
  -56
  -59
  -62
  -65
  -69
  -72
  -76
  -79
  -83
  -88
  -92
  -97
  -101
  -107
  -112
  -118
Cash from operations, $m
  4,272
  5,029
  5,250
  5,482
  5,727
  5,983
  6,253
  6,536
  6,833
  7,146
  7,474
  7,737
  8,100
  8,480
  8,880
  9,300
  9,740
  10,203
  10,690
  11,200
  11,736
  12,300
  12,891
  13,512
  14,164
  14,849
  15,568
  16,323
  17,116
  17,948
  18,822
Maintenance CAPEX, $m
  0
  -2,060
  -2,164
  -2,270
  -2,382
  -2,499
  -2,622
  -2,752
  -2,888
  -3,031
  -3,181
  -3,339
  -3,505
  -3,679
  -3,862
  -4,054
  -4,256
  -4,468
  -4,690
  -4,924
  -5,170
  -5,428
  -5,698
  -5,983
  -6,281
  -6,595
  -6,924
  -7,269
  -7,632
  -8,014
  -8,414
New CAPEX, $m
  -3,699
  -1,083
  -1,105
  -1,161
  -1,220
  -1,282
  -1,348
  -1,416
  -1,487
  -1,563
  -1,642
  -1,724
  -1,811
  -1,902
  -1,998
  -2,099
  -2,204
  -2,315
  -2,431
  -2,553
  -2,681
  -2,815
  -2,957
  -3,105
  -3,260
  -3,424
  -3,595
  -3,775
  -3,964
  -4,163
  -4,371
Cash from investing activities, $m
  -3,875
  -3,143
  -3,269
  -3,431
  -3,602
  -3,781
  -3,970
  -4,168
  -4,375
  -4,594
  -4,823
  -5,063
  -5,316
  -5,581
  -5,860
  -6,153
  -6,460
  -6,783
  -7,121
  -7,477
  -7,851
  -8,243
  -8,655
  -9,088
  -9,541
  -10,019
  -10,519
  -11,044
  -11,596
  -12,177
  -12,785
Free cash flow, $m
  397
  1,886
  1,981
  2,051
  2,124
  2,202
  2,283
  2,368
  2,458
  2,552
  2,651
  2,674
  2,783
  2,899
  3,020
  3,147
  3,280
  3,421
  3,568
  3,723
  3,886
  4,057
  4,236
  4,425
  4,623
  4,830
  5,049
  5,278
  5,519
  5,772
  6,037
Issuance/(repayment) of debt, $m
  1,861
  1,445
  1,519
  1,596
  1,677
  1,763
  1,852
  1,946
  2,044
  2,148
  2,256
  2,370
  2,489
  2,615
  2,746
  2,884
  3,029
  3,181
  3,341
  3,509
  3,685
  3,870
  4,064
  4,267
  4,481
  4,706
  4,941
  5,189
  5,449
  5,721
  6,008
Issuance/(repurchase) of shares, $m
  -1,698
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  77
  1,445
  1,519
  1,596
  1,677
  1,763
  1,852
  1,946
  2,044
  2,148
  2,256
  2,370
  2,489
  2,615
  2,746
  2,884
  3,029
  3,181
  3,341
  3,509
  3,685
  3,870
  4,064
  4,267
  4,481
  4,706
  4,941
  5,189
  5,449
  5,721
  6,008
Total cash flow (excl. dividends), $m
  474
  3,331
  3,500
  3,647
  3,802
  3,964
  4,135
  4,314
  4,502
  4,700
  4,908
  5,044
  5,273
  5,513
  5,766
  6,031
  6,310
  6,602
  6,909
  7,232
  7,571
  7,926
  8,300
  8,692
  9,104
  9,536
  9,990
  10,467
  10,968
  11,493
  12,045
Retained Cash Flow (-), $m
  122
  -323
  -345
  -362
  -381
  -400
  -420
  -442
  -464
  -488
  -512
  -538
  -565
  -594
  -623
  -655
  -688
  -722
  -758
  -796
  -836
  -878
  -922
  -969
  -1,017
  -1,068
  -1,122
  -1,178
  -1,237
  -1,299
  -1,364
Prev. year cash balance distribution, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  3,008
  3,155
  3,285
  3,421
  3,564
  3,714
  3,872
  4,038
  4,212
  4,395
  4,506
  4,708
  4,920
  5,143
  5,376
  5,622
  5,880
  6,151
  6,435
  6,734
  7,048
  7,377
  7,723
  8,086
  8,468
  8,868
  9,289
  9,731
  10,195
  10,681
Discount rate, %
 
  8.10
  8.51
  8.93
  9.38
  9.85
  10.34
  10.85
  11.40
  11.97
  12.57
  13.19
  13.85
  14.55
  15.27
  16.04
  16.84
  17.68
  18.57
  19.49
  20.47
  21.49
  22.57
  23.69
  24.88
  26.12
  27.43
  28.80
  30.24
  31.75
  33.34
PV of cash for distribution, $m
 
  2,783
  2,680
  2,541
  2,390
  2,229
  2,058
  1,882
  1,703
  1,523
  1,346
  1,153
  992
  842
  703
  577
  466
  369
  287
  218
  162
  118
  84
  58
  39
  26
  16
  10
  6
  3
  2
Current shareholders' claim on cash, %
  100
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

The Kroger Co. (Kroger) manufactures and processes food for sale in its supermarkets. The Company operates supermarkets, multi-department stores, jewelry stores and convenience stores throughout the United States. As of January 28, 2017, it had operated approximately 4,000 owned or leased supermarkets, convenience stores, fine jewelry stores, distribution warehouses and food production plants through divisions, subsidiaries or affiliates. These facilities are located throughout the United States. As of January 28, 2017, Kroger operated, either directly or through its subsidiaries, 2,796 supermarkets under a range of local banner names, of which 2,255 had pharmacies and 1,445 had fuel centers. As of January 28, 2017, the Company offered ClickList and Harris Teeter ExpressLane, personalized, order online, pick up at the store services at 637 of its supermarkets. P$$T, Check This Out and Heritage Farm are the three brands. Its other brands include Simple Truth and Simple Truth Organic.

FINANCIAL RATIOS  of  Kroger (KR)

Valuation Ratios
P/E Ratio 9.6
Price to Sales 0.2
Price to Book 2.8
Price to Tangible Book
Price to Cash Flow 4.4
Price to Free Cash Flow 33
Growth Rates
Sales Growth Rate 5%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 10.5%
Cap. Spend. - 3 Yr. Gr. Rate 9.7%
Financial Strength
Quick Ratio 0
Current Ratio 0.1
LT Debt to Equity 176.5%
Total Debt to Equity 210.2%
Interest Coverage 7
Management Effectiveness
Return On Assets 6.6%
Ret/ On Assets - 3 Yr. Avg. 6.9%
Return On Total Capital 10%
Ret/ On T. Cap. - 3 Yr. Avg. 10.5%
Return On Equity 29.2%
Return On Equity - 3 Yr. Avg. 31.5%
Asset Turnover 3.3
Profitability Ratios
Gross Margin 22.4%
Gross Margin - 3 Yr. Avg. 21.9%
EBITDA Margin 5%
EBITDA Margin - 3 Yr. Avg. 4.9%
Operating Margin 3%
Oper. Margin - 3 Yr. Avg. 3%
Pre-Tax Margin 2.5%
Pre-Tax Margin - 3 Yr. Avg. 2.6%
Net Profit Margin 1.7%
Net Profit Margin - 3 Yr. Avg. 1.7%
Effective Tax Rate 32.8%
Eff/ Tax Rate - 3 Yr. Avg. 33.6%
Payout Ratio 21.7%

KR stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the KR stock intrinsic value calculation we used $115337 million for the last fiscal year's total revenue generated by Kroger. The default revenue input number comes from 2017 income statement of Kroger. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our KR stock valuation model: a) initial revenue growth rate of 4.9% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 8.1%, whose default value for KR is calculated based on our internal credit rating of Kroger, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Kroger.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of KR stock the variable cost ratio is equal to 96.7%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for KR stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 3.9% for Kroger.

Corporate tax rate of 27% is the nominal tax rate for Kroger. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the KR stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for KR are equal to 18.6%.

Life of production assets of 10.4 years is the average useful life of capital assets used in Kroger operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for KR is equal to -0.5%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $6698 million for Kroger - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 924.563 million for Kroger is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Kroger at the current share price and the inputted number of shares is $18.9 billion.

RELATED COMPANIES Price Int.Val. Rating
SVU Supervalu 18.81 76.67  str.buy
WFM Whole Foods Ma 41.99 27.88  sell
SFM Sprouts Farmer 18.75 29.66  buy
IMKTA Ingles Markets 24.10 18.15  sell
WMT Wal-Mart Store 85.74 72.20  hold

COMPANY NEWS

▶ Kroger examines selling its massive convenience store business   [Oct-16-17 05:30PM  American City Business Journals]
▶ [$$] Can Kroger Keep Recent EPS Guidance?   [01:05PM  Barrons.com]
▶ Grocers Imagine the Store of the Future   [12:17AM  The Wall Street Journal]
▶ Grocers Imagine the Store of the Future   [Oct-15-17 10:08PM  The Wall Street Journal]
▶ Is There Life After Amazon for Kroger?   [10:39AM  TheStreet.com]
▶ [$$] Kroger Weighs Sale of Convenience Stores   [12:18AM  The Wall Street Journal]
▶ [$$] Kroger Weighs Sale of Convenience Stores   [Oct-11-17 06:23PM  The Wall Street Journal]
▶ 2 Stocks Gain on Wednesday   [01:16PM  GuruFocus.com]
▶ Why Kroger Is Flying   [12:50PM  Barrons.com]
▶ Kroger Must Admit Its Amazon Problem   [12:45PM  Bloomberg]
▶ Will Analysts Upgrade Walmart Stock?   [11:05AM  Market Realist]
▶ These Are the Stores Losing Traffic to Whole Foods   [Oct-10-17 06:22PM  Motley Fool]
▶ Here are the top 10 Cincinnati stocks so far this year: SLIDESHOW   [04:56PM  American City Business Journals]
▶ Kroger Faces Battle Against Amazon.com: Barclays   [Oct-06-17 11:24PM  Investopedia]
▶ Kroger Co (KR) Is Getting Desperate   [09:58AM  InvestorPlace]
▶ Costco preps for doomsday with 1-year food kits   [12:56PM  Yahoo Finance Video]
▶ Wait, Who Is Beating Walmart on Food Prices!?   [Oct-03-17 04:33PM  TheStreet.com]
▶ Rite Aid, JC Penney Tumble into Mondays 52-Week Low Club   [Oct-02-17 04:04PM  24/7 Wall St.]
▶ Costco Earnings: What to Watch   [Oct-01-17 01:00PM  Motley Fool]
▶ Walmart is beefing up Jet.com   [01:03PM  Yahoo Finance Video]
▶ [$$] Grocers' Problem: Amazon Doesn't Need to Make Money on Food   [Sep-28-17 06:22PM  The Wall Street Journal]
▶ Kroger to Host 2017 Investor Conference   [Sep-27-17 02:00PM  PR Newswire]
▶ Why Its Important to Buy Costco (COST) Stock Right Now   [Sep-26-17 03:18PM  InvestorPlace]
▶ Is It Time To Buy The Kroger Co (KR)?   [Sep-25-17 08:23PM  Simply Wall St.]
▶ Kroger's Most Complex Task Yet   [02:56PM  Motley Fool]
▶ [$$] Kroger Pitches to Niche Food Product Brands   [12:11AM  The Wall Street Journal]
▶ [$$] Kroger Pitches to Niche Food Product Brands   [Sep-22-17 05:34PM  The Wall Street Journal]
▶ Kroger ranks among healthiest workplaces in U.S.   [11:57AM  American City Business Journals]
▶ ETFs with exposure to The Kroger Co. : September 20, 2017   [Sep-20-17 05:46PM  Capital Cube]
Financial statements of KR
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

FREE DOWNLOAD
Follow us on:   twitter   twitter   twitter   twitter

VALUATION THEORY       ASSET ALLOCATION

About X-FIN       Site news       Privacy policy       Terms of use       FAQ

Copyright © X-FIN.com 2005-2017. All rigths reserved.