KR vs. WMT: Which Stock Is the Better Value Option?

Investors interested in Retail - Supermarkets stocks are likely familiar with Kroger (KR) and Walmart (WMT). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.

Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. The proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.

Right now, Kroger is sporting a Zacks Rank of #2 (Buy), while Walmart has a Zacks Rank of #3 (Hold). Investors should feel comfortable knowing that KR likely has seen a stronger improvement to its earnings outlook than WMT has recently. However, value investors will care about much more than just this.

Value investors are also interested in a number of tried-and-true valuation metrics that help show when a company is undervalued at its current share price levels.

The Style Score Value grade factors in a variety of key fundamental metrics, including the popular P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other key stats that are commonly used by value investors.

KR currently has a forward P/E ratio of 12.14, while WMT has a forward P/E of 41.20. We also note that KR has a PEG ratio of 1.69. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. WMT currently has a PEG ratio of 4.44.

Another notable valuation metric for KR is its P/B ratio of 6.79. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. For comparison, WMT has a P/B of 9.41.

Based on these metrics and many more, KR holds a Value grade of A, while WMT has a Value grade of D.

KR has seen stronger estimate revision activity and sports more attractive valuation metrics than WMT, so it seems like value investors will conclude that KR is the superior option right now.

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This article originally published on Zacks Investment Research (zacks.com).

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