Grocery store profit margins are notoriously slim, so choosing a winning stock in this space is not exactly easy. Albertsons Companies (ACI) and Kroger (KR) are two top supermarket companies, yet some traders on the east coast might not have stepped foot in the stores of either of these companies.
Both companies are growing businesses with happy customers who have proven quite loyal to both chains. Shoppers far and wide have embraced the DIY ethos, ramping up their supermarket shopping during the pandemic. This trend has the potential to continue even after the economy fully reopens, ultimately helping grocers rake in even more cash.
Which is a better buy at the moment? Let's find out.
Albertsons Companies (ACI)
As an upscale grocer with slightly higher than average prices, ACI is on the same level as Wegmans yet not quite as bourgeoisie as Whole Foods. Visit an ACI store for yourself, and you will find it is clean, well-organized, and visually pleasing.
ACI is a POWR Ratings beast with an overall grade of A, meaning it is a Strong Buy. The stock has an A grade in the Value component and B grades in the Quality, Sentiment, and Growth components. Click here to learn more about how ACI fares in terms of the Momentum and Stability components. Of the 40 stocks in the Grocery/Big Box Retailers industry, ACI is ranked fourth. Click here to find other tops stocks in this industry.
Analysts like ACI, establishing an average target price of $20.94. This indicates a potential upside of nearly 14%. The highest analyst target price for the stock is $31. Out of 17 analysts who cover the stock, five rate it a Strong Buy, and seven rate it as a Buy.
While ACI stores are not nationwide, there is no arguing they provide a wide selection of food and other products at reasonable prices. ACI has the potential to compete with stores such as Walmart (WMT), Wegmans, Whole Foods, and others as it continues to expand.
Kroger (KR)
KR is a supermarket success story, partially because the company's leaders have demonstrated a willingness to change. KR bolstered its offerings by providing a litany of plant-based products and ramping up its tech expansion in recent years. KR even has a meal kit subsidiary known as Home Chef.
Furthermore, the company partnered with the English web-based grocery delivery services known as Ocado, cementing its online ordering and home delivery strength. KR also teamed up with Nuro, an autonomous car business, with the overarching aim of delivering groceries and other items to customers without paying a human driver to do the work.
KR has an overall grade of C in the POWR Ratings. The stock has an A grade in the Value component and a B Quality Grade. KR has Cs in the Momentum and Sentiment components. If you are curious as to how KR grades out in the Growth and Stability components, click here to find out. Of the 40 publicly traded companies in the Grocery/Big Box Retailers index, KR is ranked 32nd.
Analysts are not as bullish on KR as they are on ACI. Of the 23 analysts who have issued recommendations for KR, only six view it as a Strong Buy or Buy. The average analyst target price for the stock is $35, indicating a potential small downside.
The Better Buy
Though KR certainly deserves credit for expanding its value proposition in an attempt to secure the business of at-home shoppers, vegans, and vegetarians, you cannot argue with ACI's superior POWR Rating. The company provides a nearly flawless shopping experience and is more deserving of your investing dollars.
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ACI shares were trading at $18.53 per share on Wednesday afternoon, down $0.13 (-0.70%). Year-to-date, ACI has gained 6.01%, versus a 8.94% rise in the benchmark S&P 500 index during the same period.
About the Author: Patrick Ryan
Patrick Ryan has more than a dozen years of investing experience with a focus on information technology, consumer and entertainment sectors. In addition to working for StockNews, Patrick has also written for Wealth Authority and Fallon Wealth Management.
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