Revisit Kroger’s Value After Merger News and a 17% Stock

Kroger’s stock has posted a 2.8% gain over the past week, rebounding after a 3.5% dip in the last month, and is sitting on a solid 17.3% return over the past year.

Much of this movement has been driven by ongoing discussions about the company’s merger plans and evolving trends in the grocery sector, grabbing investors’ attention. Recent headlines about retail partnerships and increased focus on digital growth have only added to the interest and volatility around the stock.

When it comes to valuation, Kroger scores a 5 out of 6 on Simply Wall St’s value checks, suggesting it may be undervalued by most measures. In the next section, we will break down the valuation details using the main methods. Plus, stick around to see if there is an even better way to judge whether Kroger is a bargain.

Approach 1: Kroger Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow (DCF) model estimates what a company is worth today by projecting all the cash it will generate in the future and discounting those values back to the present. This approach provides a way to determine the intrinsic value based on cash generation, rather than relying solely on current profits or sales figures.

Kroger’s current Free Cash Flow stands at $2.2 Billion, and analysts have made projections out to 2030, forecasting Free Cash Flow to grow to approximately $3.2 Billion. Estimates only extend five years ahead before longer-term numbers are extrapolated based on trends. These future values reflect both expert opinion and mathematical modeling.

When these future cash flows are discounted back, the resulting DCF valuation estimates Kroger’s fair value at $87.68 per share. With the intrinsic discount at 23.9%, this suggests the stock is trading well below its underlying value. For investors, this means Kroger currently appears undervalued based on its future cash generation potential and DCF modeling.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Kroger is undervalued by 23.9%. Track this in your watchlist or portfolio, or discover 879 more undervalued stocks based on cash flows.