Kroger adds 4.5% as Deutsche Bank says shares are undervalued

Kroger (KR) gained 4.5% today after a Deutsche Bank analyst said KR shares are trading at a substantial discount given the retailer's metrics, including comparable store sales at ~3% and EPS growth of 8%-12%.

In keeping its Buy rating on the shares, DB believes "KR stands apart from other conventional grocers given its much greater scale, stronger local market share positions, broad private brand portfolio, and very consistent history of positive non-fuel ID’s.”

The firm thinks KR or P-E firm Cerberus could acquire Safeway (SWY), estimating the valuation range for a deal at $45-$55, adding to recent rumors about a deal.

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