Intrinsic value of Kroger - KR

Previous Close

$26.68

  Intrinsic Value

$29.51

stock screener

  Rating & Target

hold

+11%

Previous close

$26.68

 
Intrinsic value

$29.51

 
Up/down potential

+11%

 
Rating

hold

*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 23.7

 

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
  3.90
  4.01
  4.11
  4.20
  4.28
  4.35
  4.42
  4.47
  4.53
  4.57
  4.62
  4.65
  4.69
  4.72
  4.75
  4.77
  4.80
  4.82
  4.83
  4.85
  4.87
  4.88
  4.89
  4.90
  4.91
  4.92
  4.93
  4.94
  4.94
  4.95
Revenue, $m
  115,337
  119,835
  124,641
  129,762
  135,210
  140,994
  147,128
  153,624
  160,497
  167,762
  175,435
  183,534
  192,078
  201,085
  210,577
  220,576
  231,105
  242,189
  253,854
  266,128
  279,039
  292,617
  306,896
  321,908
  337,690
  354,278
  371,712
  390,034
  409,286
  429,515
  450,768
Variable operating expenses, $m
 
  115,869
  120,503
  125,442
  130,695
  136,274
  142,189
  148,454
  155,082
  162,088
  169,488
  176,995
  185,234
  193,920
  203,074
  212,717
  222,871
  233,560
  244,810
  256,646
  269,097
  282,192
  295,962
  310,440
  325,659
  341,656
  358,469
  376,138
  394,704
  414,212
  434,708
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
  115,869
  120,503
  125,442
  130,695
  136,274
  142,189
  148,454
  155,082
  162,088
  169,488
  176,995
  185,234
  193,920
  203,074
  212,717
  222,871
  233,560
  244,810
  256,646
  269,097
  282,192
  295,962
  310,440
  325,659
  341,656
  358,469
  376,138
  394,704
  414,212
  434,708
Operating income, $m
  3,436
  3,966
  4,138
  4,320
  4,514
  4,720
  4,939
  5,170
  5,415
  5,674
  5,947
  6,539
  6,843
  7,164
  7,502
  7,859
  8,234
  8,629
  9,044
  9,482
  9,942
  10,425
  10,934
  11,469
  12,031
  12,622
  13,243
  13,896
  14,582
  15,303
  16,060
EBITDA, $m
  5,776
  6,413
  6,670
  6,944
  7,235
  7,545
  7,873
  8,221
  8,589
  8,977
  9,388
  9,821
  10,279
  10,761
  11,268
  11,804
  12,367
  12,960
  13,584
  14,241
  14,932
  15,659
  16,423
  17,226
  18,071
  18,958
  19,891
  20,872
  21,902
  22,984
  24,122
Interest expense (income), $m
  505
  536
  581
  629
  680
  735
  792
  853
  918
  987
  1,059
  1,136
  1,216
  1,302
  1,391
  1,486
  1,586
  1,691
  1,801
  1,918
  2,040
  2,169
  2,304
  2,446
  2,596
  2,753
  2,919
  3,093
  3,275
  3,467
  3,669
Earnings before tax, $m
  2,914
  3,430
  3,556
  3,691
  3,834
  3,986
  4,147
  4,317
  4,497
  4,687
  4,888
  5,403
  5,627
  5,863
  6,111
  6,373
  6,648
  6,938
  7,243
  7,564
  7,902
  8,257
  8,630
  9,023
  9,435
  9,869
  10,325
  10,804
  11,307
  11,836
  12,391
Tax expense, $m
  957
  926
  960
  997
  1,035
  1,076
  1,120
  1,166
  1,214
  1,266
  1,320
  1,459
  1,519
  1,583
  1,650
  1,721
  1,795
  1,873
  1,956
  2,042
  2,133
  2,229
  2,330
  2,436
  2,547
  2,665
  2,788
  2,917
  3,053
  3,196
  3,346
Net income, $m
  1,975
  2,504
  2,596
  2,694
  2,799
  2,910
  3,027
  3,151
  3,283
  3,422
  3,568
  3,944
  4,108
  4,280
  4,461
  4,652
  4,853
  5,065
  5,287
  5,522
  5,768
  6,027
  6,300
  6,586
  6,888
  7,204
  7,537
  7,887
  8,254
  8,640
  9,045

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
  37,589
  39,097
  40,703
  42,412
  44,227
  46,151
  48,188
  50,344
  52,623
  55,030
  57,570
  60,250
  63,075
  66,053
  69,189
  72,492
  75,969
  79,628
  83,478
  87,528
  91,787
  96,266
  100,975
  105,925
  111,129
  116,597
  122,344
  128,383
  134,729
  141,395
Adjusted assets (=assets-cash), $m
  36,183
  37,589
  39,097
  40,703
  42,412
  44,227
  46,151
  48,188
  50,344
  52,623
  55,030
  57,570
  60,250
  63,075
  66,053
  69,189
  72,492
  75,969
  79,628
  83,478
  87,528
  91,787
  96,266
  100,975
  105,925
  111,129
  116,597
  122,344
  128,383
  134,729
  141,395
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
  22,289
  23,183
  24,136
  25,149
  26,225
  27,366
  28,574
  29,853
  31,204
  32,631
  34,137
  35,726
  37,402
  39,167
  41,027
  42,985
  45,047
  47,217
  49,500
  51,901
  54,427
  57,083
  59,875
  62,810
  65,896
  69,139
  72,546
  76,127
  79,890
  83,843
Working capital, $m
  -2,520
  -599
  -623
  -649
  -676
  -705
  -736
  -768
  -802
  -839
  -877
  -918
  -960
  -1,005
  -1,053
  -1,103
  -1,156
  -1,211
  -1,269
  -1,331
  -1,395
  -1,463
  -1,534
  -1,610
  -1,688
  -1,771
  -1,859
  -1,950
  -2,046
  -2,148
  -2,254
Total debt, $m
  14,077
  14,905
  16,134
  17,443
  18,836
  20,315
  21,883
  23,543
  25,301
  27,158
  29,119
  31,190
  33,374
  35,677
  38,103
  40,659
  43,351
  46,185
  49,167
  52,305
  55,605
  59,077
  62,727
  66,565
  70,599
  74,840
  79,297
  83,981
  88,902
  94,074
  99,507
Total liabilities, $m
  29,807
  30,635
  31,864
  33,173
  34,566
  36,045
  37,613
  39,273
  41,031
  42,888
  44,849
  46,920
  49,104
  51,407
  53,833
  56,389
  59,081
  61,915
  64,897
  68,035
  71,335
  74,807
  78,457
  82,295
  86,329
  90,570
  95,027
  99,711
  104,632
  109,804
  115,237
Total equity, $m
  6,698
  6,954
  7,233
  7,530
  7,846
  8,182
  8,538
  8,915
  9,314
  9,735
  10,181
  10,651
  11,146
  11,669
  12,220
  12,800
  13,411
  14,054
  14,731
  15,443
  16,193
  16,981
  17,809
  18,680
  19,596
  20,559
  21,571
  22,634
  23,751
  24,925
  26,158
Total liabilities and equity, $m
  36,505
  37,589
  39,097
  40,703
  42,412
  44,227
  46,151
  48,188
  50,345
  52,623
  55,030
  57,571
  60,250
  63,076
  66,053
  69,189
  72,492
  75,969
  79,628
  83,478
  87,528
  91,788
  96,266
  100,975
  105,925
  111,129
  116,598
  122,345
  128,383
  134,729
  141,395
Debt-to-equity ratio
  2.102
  2.140
  2.230
  2.320
  2.400
  2.480
  2.560
  2.640
  2.720
  2.790
  2.860
  2.930
  2.990
  3.060
  3.120
  3.180
  3.230
  3.290
  3.340
  3.390
  3.430
  3.480
  3.520
  3.560
  3.600
  3.640
  3.680
  3.710
  3.740
  3.770
  3.800
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
  2,504
  2,596
  2,694
  2,799
  2,910
  3,027
  3,151
  3,283
  3,422
  3,568
  3,944
  4,108
  4,280
  4,461
  4,652
  4,853
  5,065
  5,287
  5,522
  5,768
  6,027
  6,300
  6,586
  6,888
  7,204
  7,537
  7,887
  8,254
  8,640
  9,045
Depreciation, amort., depletion, $m
  2,340
  2,446
  2,532
  2,624
  2,721
  2,825
  2,934
  3,051
  3,174
  3,303
  3,441
  3,282
  3,435
  3,596
  3,766
  3,945
  4,133
  4,331
  4,540
  4,760
  4,990
  5,233
  5,489
  5,757
  6,039
  6,336
  6,648
  6,976
  7,320
  7,682
  8,062
Funds from operations, $m
  3,533
  4,950
  5,128
  5,318
  5,520
  5,734
  5,961
  6,202
  6,456
  6,725
  7,009
  7,227
  7,543
  7,876
  8,227
  8,597
  8,986
  9,396
  9,828
  10,281
  10,759
  11,261
  11,789
  12,344
  12,927
  13,540
  14,185
  14,862
  15,574
  16,322
  17,107
Change in working capital, $m
  -739
  -22
  -24
  -26
  -27
  -29
  -31
  -32
  -34
  -36
  -38
  -40
  -43
  -45
  -47
  -50
  -53
  -55
  -58
  -61
  -65
  -68
  -71
  -75
  -79
  -83
  -87
  -92
  -96
  -101
  -106
Cash from operations, $m
  4,272
  4,973
  5,152
  5,344
  5,547
  5,763
  5,992
  6,234
  6,491
  6,761
  7,047
  7,267
  7,586
  7,921
  8,275
  8,647
  9,039
  9,452
  9,886
  10,343
  10,823
  11,329
  11,860
  12,419
  13,006
  13,623
  14,272
  14,954
  15,670
  16,423
  17,214
Maintenance CAPEX, $m
  0
  -2,060
  -2,143
  -2,229
  -2,321
  -2,418
  -2,522
  -2,631
  -2,748
  -2,870
  -3,000
  -3,138
  -3,282
  -3,435
  -3,596
  -3,766
  -3,945
  -4,133
  -4,331
  -4,540
  -4,760
  -4,990
  -5,233
  -5,489
  -5,757
  -6,039
  -6,336
  -6,648
  -6,976
  -7,320
  -7,682
New CAPEX, $m
  -3,699
  -869
  -894
  -953
  -1,013
  -1,076
  -1,141
  -1,208
  -1,278
  -1,351
  -1,427
  -1,506
  -1,589
  -1,675
  -1,766
  -1,860
  -1,958
  -2,062
  -2,170
  -2,283
  -2,401
  -2,526
  -2,656
  -2,792
  -2,935
  -3,085
  -3,243
  -3,408
  -3,581
  -3,763
  -3,953
Cash from investing activities, $m
  -3,875
  -2,929
  -3,037
  -3,182
  -3,334
  -3,494
  -3,663
  -3,839
  -4,026
  -4,221
  -4,427
  -4,644
  -4,871
  -5,110
  -5,362
  -5,626
  -5,903
  -6,195
  -6,501
  -6,823
  -7,161
  -7,516
  -7,889
  -8,281
  -8,692
  -9,124
  -9,579
  -10,056
  -10,557
  -11,083
  -11,635
Free cash flow, $m
  397
  2,044
  2,115
  2,162
  2,213
  2,269
  2,330
  2,395
  2,465
  2,540
  2,620
  2,623
  2,714
  2,811
  2,913
  3,021
  3,136
  3,257
  3,385
  3,520
  3,662
  3,813
  3,971
  4,138
  4,313
  4,498
  4,693
  4,898
  5,114
  5,340
  5,579
Issuance/(repayment) of debt, $m
  1,861
  1,150
  1,228
  1,309
  1,393
  1,479
  1,568
  1,661
  1,757
  1,857
  1,962
  2,070
  2,184
  2,303
  2,427
  2,556
  2,692
  2,834
  2,982
  3,138
  3,301
  3,471
  3,650
  3,838
  4,035
  4,241
  4,457
  4,684
  4,922
  5,171
  5,433
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
  1,150
  1,228
  1,309
  1,393
  1,479
  1,568
  1,661
  1,757
  1,857
  1,962
  2,070
  2,184
  2,303
  2,427
  2,556
  2,692
  2,834
  2,982
  3,138
  3,301
  3,471
  3,650
  3,838
  4,035
  4,241
  4,457
  4,684
  4,922
  5,171
  5,433
Total cash flow (excl. dividends), $m
  474
  3,195
  3,344
  3,471
  3,606
  3,748
  3,898
  4,055
  4,222
  4,397
  4,581
  4,694
  4,898
  5,113
  5,339
  5,577
  5,827
  6,090
  6,367
  6,657
  6,963
  7,284
  7,621
  7,976
  8,348
  8,739
  9,150
  9,582
  10,035
  10,512
  11,012
Retained Cash Flow (-), $m
  122
  -256
  -279
  -297
  -316
  -336
  -356
  -377
  -399
  -422
  -445
  -470
  -496
  -523
  -551
  -580
  -611
  -643
  -677
  -712
  -749
  -788
  -829
  -871
  -916
  -963
  -1,012
  -1,063
  -1,117
  -1,174
  -1,233
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
 
  2,938
  3,065
  3,174
  3,290
  3,412
  3,542
  3,678
  3,823
  3,975
  4,136
  4,224
  4,402
  4,590
  4,789
  4,997
  5,216
  5,447
  5,690
  5,945
  6,214
  6,496
  6,793
  7,104
  7,432
  7,777
  8,138
  8,519
  8,918
  9,338
  9,779
Discount rate, %
 
  8.00
  8.40
  8.82
  9.26
  9.72
  10.21
  10.72
  11.26
  11.82
  12.41
  13.03
  13.68
  14.37
  15.09
  15.84
  16.63
  17.46
  18.34
  19.25
  20.22
  21.23
  22.29
  23.40
  24.57
  25.80
  27.09
  28.45
  29.87
  31.36
  32.93
PV of cash for distribution, $m
 
  2,721
  2,608
  2,463
  2,308
  2,145
  1,976
  1,803
  1,628
  1,455
  1,284
  1,098
  945
  802
  670
  551
  445
  353
  275
  210
  156
  114
  81
  56
  38
  25
  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 12.5
Price to Sales 0.2
Price to Book 3.7
Price to Tangible Book
Price to Cash Flow 5.8
Price to Free Cash Flow 43
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 3.9% 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%, 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 889.629 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 $23.7 billion.

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COMPANY NEWS

▶ Opening date set for Kroger in former Camp Strake development   [07:20AM  American City Business Journals]
▶ Why Kroger Stock Soared 25% in November   [Dec-07-17 06:44PM  Motley Fool]
▶ 1 Dividend Stock to Buy in December   [Dec-06-17 07:46PM  Motley Fool]
▶ Sizing up Krogers Restock Kroger Initiative   [10:32AM  Market Realist]
▶ 3Q18 Earnings Overview: Kroger Outperforms Expectations   [Dec-05-17 05:52PM  Market Realist]
▶ Kroger recalls purified water   [10:50AM  American City Business Journals]
▶ 5 Things Kroger Wants You to Know   [09:30AM  Motley Fool]
▶ Kroger Proves There's Life After Amazon/Whole Foods   [Dec-04-17 07:45PM  Motley Fool]
▶ Company News For Dec 1, 2017   [09:43AM  Zacks]
▶ [$$] Kroger Investors Cleaning Up in Aisle Five   [12:04AM  The Wall Street Journal]
▶ [$$] Kroger Rings Up Profit Gains in Fight Against Wal-Mart, Amazon   [Nov-30-17 11:31PM  The Wall Street Journal]
▶ Why Kroger Co. Stock Popped on Thursday   [08:31PM  Motley Fool]
▶ Kroger's Growth Pace Accelerates   [05:01PM  Motley Fool]
▶ What Happened in the Stock Market Today   [05:00PM  Motley Fool]
▶ Heres why Kroger stock is jumping   [04:52PM  American City Business Journals]
▶ Kroger Earnings Unexpectedly Rise Despite Amazon Competition   [04:15PM  Investor's Business Daily]
▶ Kroger: All the Gains in Just One Day?   [11:12AM  Barrons.com]
▶ A Day Of Gains And Losses   [10:37AM  Zacks]
▶ Kroger Reports Third Quarter Results   [07:42AM  PR Newswire]
▶ Kroger struggles to overcome online competition   [Nov-29-17 03:53PM  CNBC Videos]
▶ 3rd Quarter Will Be Crucial for Kroger Stock   [10:50AM  GuruFocus.com]
▶ How Krogers Valuation Compares   [07:33AM  Market Realist]
▶ Sprouts Is Closing Out a Surprisingly Good Year   [Nov-28-17 04:41PM  Motley Fool]
▶ The 10 Best Acquisitions of 2017   [03:01PM  InvestorPlace]
▶ Kroger Supports #GivingTuesday   [09:00AM  PR Newswire]
▶ 3 Things to Watch in the Stock Market This Week   [Nov-26-17 07:09PM  Motley Fool]
▶ Kroger Earnings: What to Watch   [01:00PM  Motley Fool]
▶ IIROC Trade Resumption - KR Investment Ltd.   [Nov-24-17 04:10PM  Newsfile]
▶ Yahoo Finance Live: Midday Movers - Nov 27th, 2017   [Nov-23-17 09:40AM  Yahoo Finance Video]
▶ What Does Kroger Know About Fashion?   [Nov-22-17 02:33PM  Motley Fool]
▶ [$$] Big Kroger Investor Slashes Stock Holdings   [Nov-20-17 04:40PM  Barrons.com]
▶ These Stocks Are Making U-Turns   [01:00PM  TheStreet.com]
▶ Guess Who's Buying Kroger?   [Nov-17-17 02:17PM  Barrons.com]
▶ One of Cincinnati's largest law firms hires new partner   [Nov-16-17 10:30AM  American City Business Journals]
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.

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