We recently compiled a list of the 9 Best Pizza Stocks to Buy Now. In this article, we are going to take a look at where The Kroger Co. (NYSE:KR) stands against the other pizza stocks.
How’s the Pizza Market Doing?
Originating from Italy hundreds of years ago, and spreading across the globe like wildfire ever since, pizza has always been the consumers’ go-to food option, and hence, its market is growing to date. As such, as reported in one of our articles on best pizza stocks to buy, the pizza market is set to experience a CAGR of 4.45% during the period 2024-2032, growing from $148.6 billion in 2023 to $222.5 billion by 2032. Similarly, the frozen pizza segment is also expected to increase during the period 2023-2028, gathering a market size of $5.96 billion during the period, showcasing a CAGR of 4.96%.
The popularity of pizza can be judged from the statistics showing that there are 245,000 pizza restaurants in the world, and around 77,000 restaurants within the U.S. The U.S. itself experienced record-high pizza sales of $46.9 billion in 2022, thanks to over 7,000 units opening up in the eight years up till 2022. This reinforces the fact that the largest pizza chains in the world are based in the U.S. Pizza Hut, one of the biggest pizza brands in the world, is the oldest one, which was founded back in 1958 in Kansas, USA.
What’s Cooking in the Industry?
Within the frozen pizza segment, meat toppings dominate the market as it has a share of 56% in sales, while vegetable toppings have a share of 26%. In contrast, cheese toppings are also competing nicely, as it has a 14% share, as reported by media.market.us. DiGiorno, Red Baron, and Totino’s Party Pizza are the top frozen pizza brands with the greatest brand awareness.
The recent trends in the pizza market include rising demand for vegan pizzas (frozen or otherwise); this evolving market of pizza has got is on a roll, as new demands keep popping up for cheese substitutes, all sorts of pepperoni, Mexican style meats like Birria and chorizo, and new topping varieties
What’s new in the industry is the rapid acceleration of technology use in the context of operators, as a survey shows that 748 pizza makers in the U.S. find online ordering the new go-to way of consuming pizzas and that 78.21% of the producers are investing in a great deal to up their brand presence across the internet. The optimism is on the high side as well amongst the pizza makers as most believe in sales growth in the next twelve months.
Thus, certainly, the pizza market is one to grow indefinitely (or at least it should), and hence, to capitalize on this growth, one must know the best pizza stock to buy. So, let’s move on to our list of 9 Best Pizza Stocks to Buy Now.
Methodology
To curate our list of 9 Best Pizza Stocks to Buy Now, we gathered a list of all companies with a significant presence in the pizza industry and related industries of cheese and flour. We then further narrowed them down on the basis of various metrics like institutional ownership, the number of analysts watching the stock, and the overall financial health of respective stocks. We ranked the finest remaining companies by the number of hedge funds that had stake in them as of Q2, 2024.
At Insider Monkey, we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A customer buying an item at a checkout counter in a grocery store.
The Kroger Co. (NYSE:KR)
Number of Hedge Fund Holders: 46
Upside Potential: 11.23%
The Kroger Co. (NYSE:KR), based in the U.S., is a retail company, running supermarkets and multi-department stores all across the U.S. The retailer has a strong presence in the frozen pizza segment, selling pizzas of all sorts of flavors.
The stock is all for the gainers, as The Kroger Co. (NYSE:KR) is doing all it can to realize its merger of Albertsons Cos., the company’s rival. The proposed merger is worth $25 billion and it will mean over 4,000 stores under the name of Kroger.
However, the merger is yet to be realized; the trial for this matter is set to take place in September 2024. But Kroger has announced that it will reduce grocery prices by a significant $1 billion given that the merger takes place in a bid to please regulators. Thus, it seems like the company wishes to materialize the merger at any cost, which increases the prospects of growth for the company in coming times, given the market share gain it would bring for Kroger.
Kroger had a decent go in Q1 2025 ending May 25, 2024, wherein the company reported total sales of $45.3 billion, which were up by 0.6% year over year. The gross profit margin, however, took a dip of seven basis points, as lower pharmacy margins drove the overall margins down. Operating expenses also rose in the quarter by 22 basis points because of wages and higher incentive plan costs.
The company expects its full-year FIFO operating profit to grow in the range of somewhere between $4.6-$4.8 billion in 2025 from $3.1 billion recorded in the fiscal year 2024. Moreover, Kroger expects to incur capital expenditure (Capex) of $3.4-$3.6 billion, while maintaining a free cash flow of $2.5-$2.7 billion, which speaks a lot about the company’s future investments while maintaining a healthy cash position.
Kroger is continuing to expand as it introduced 346 new brands of its own. Moreover, the company’s fulfillment centers drove delivery sales by 17% in the quarter, further showcasing its robust growth being in line with rapidly changing technology.
With four states’ attorneys general in the U.S. speaking in favor of the proposed merger, and with the planned investments of $1 billion in lower grocery prices, along with an additional $1.3 billion to improve Albertsons stores, 46 hedge funds are bullish on the stock, as of Q2, 2024. Warren Buffet’s Berkshire Hathaway has invested $2.5 billion in the stock. Plus, the stock has upside potential of 11.23% according to 17 analysts.
Overall KR ranks 2nd on our list of the best pizza stocks to buy. While we acknowledge the potential of KR as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for a deeply undervalued AI stock that is more promising than KR but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
