Analyzing Safeway (SWY) & Kroger (NYSE:KR)

Kroger (NYSE: KR) and Safeway (NYSE:SWY) are both non-cyclical consumer goods & services companies, but which is the better investment? We will contrast the two businesses based on the strength of their valuation, analyst recommendations, profitability, earnings, dividends, risk and institutional ownership.

Institutional & Insider Ownership

79.6% of Kroger shares are held by institutional investors. 0.9% of Kroger shares are held by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company is poised for long-term growth.

Valuation & Earnings

This table compares Kroger and Safeway’s revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Kroger $115.34 billion 0.22 $1.98 billion $1.68 17.46
Safeway N/A N/A N/A $0.12 292.50

Kroger has higher revenue and earnings than Safeway. Kroger is trading at a lower price-to-earnings ratio than Safeway, indicating that it is currently the more affordable of the two stocks.

Volatility & Risk

Kroger has a beta of 0.96, indicating that its share price is 4% less volatile than the S&P 500. Comparatively, Safeway has a beta of 1.09, indicating that its share price is 9% more volatile than the S&P 500.

Profitability

This table compares Kroger and Safeway’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Kroger 1.31% 28.60% 4.94%
Safeway -0.26% -1.66% -0.69%

Dividends

Kroger pays an annual dividend of $0.50 per share and has a dividend yield of 1.7%. Safeway does not pay a dividend. Kroger pays out 29.8% of its earnings in the form of a dividend. Kroger has raised its dividend for 9 consecutive years.

Analyst Ratings

This is a summary of current recommendations and price targets for Kroger and Safeway, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Kroger 0 13 11 0 2.46
Safeway 0 0 0 0 N/A

Kroger presently has a consensus target price of $29.90, suggesting a potential upside of 1.91%. Given Kroger’s higher possible upside, equities research analysts clearly believe Kroger is more favorable than Safeway.

Summary

Kroger beats Safeway on 11 of the 14 factors compared between the two stocks.

Kroger Company Profile

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.

Safeway Company Profile

Safeway Inc., is an food and drug retail company. The Company owns and operates GroceryWorks.com Operating Company, LLC, an online grocery channel doing business under the names Safeway.com and Vons.com. Blackhawk, a majority-owned subsidiary of Safeway, is a prepaid payment network utilizing proprietary technology to offer gift cards, other prepaid products and payment services. Blackhawk’s payment network supports its three primary constituents: consumers who purchase the products and services Blackhawk offers, content providers who offer branded products that are redeemable for goods and services, and distribution partners who sell the products. Blackhawk’s product offerings include gift cards, prepaid telecom products and prepaid financial services products, including general purpose reloadable cards and Blackhawk’s reload network.

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