The Kroger Co. (KR), Wal-Mart Stores, Inc. (WMT): This Supermarket Chain Offers Superior Value

Another grocer, Whole Foods Market, Inc. (NASDAQ:WFM), has been delivering huge growth in the last few years. Annual EPS has risen from $0.85 in 2009 to $2.52 in 2012, and the expected 3-5 year EPS growth rate is around 45%. In its latest earnings report, the company saw sales rise 13% and comp sales up 6.9%. Net income increased 21%, and the company furthermore achieved record operating margin of 7.5%. As more and more US consumers are opting for healthier, greener groceries, the company stands to benefit from even more growth in the future. On the other hand, this growth comes at a steep price.

Valuations and Metrics

The Kroger Co. (NYSE:KR) is currently trading at a generous discount to the industry, with a P/E of only 12.56 times trailing earnings versus an industry average of 26.72. Whole Foods trades at a premium with a P/E of 37.04 and Wal-Mart Stores, Inc. (NYSE:WMT) trades at 15.69 times trailing earnings. The Kroger Co. (NYSE:KR)’s operating margin isn’t too impressive at around 3%, but trading at only 0.19 to sales, it still looks like a bargain. The stock has an excellent return on equity of around 37%. These are to my mind fairly strong metrics.

The Bottom Line

It’s a challenge to find good deals in the consumer staples sector at the moment, as the unrelenting rally has driven many of these companies to fairly high valuations. Kroger seems to be an exception here, trading at a steep discount to its industry and still delivering excellent growth. While some competitors may be growing faster, The Kroger Co. (NYSE:KR) seems like a solid choice based on its performance and valuation.

The article This Supermarket Chain Offers Superior Value originally appeared on Fool.com is written by Daniel James.

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