Despite economic uncertainties, the grocery retail industry is expected to remain resilient due to inelastic demand for its products. So, quality grocery stocks Walmart Inc. (WMT), PriceSmart, Inc. (PSMT), and Ingles Markets, Incorporated (IMKTA) could be wise additions to your portfolio now.
Retail sales in the US rose 0.2% month-over-month in June 2023, following an upwardly revised 0.5% increase in May. Consumer spending remained steady as inflation declined to two-year lows in June.
The global supermarket market is expected to reach $23.69 billion by 2028, increasing at an 8% CAGR. Global supermarket market expansion is driven by rising demand, smart technology integration, and store expansions.
In addition, the US online grocery market is expected to expand at a CAGR of 18.8% until 2028. The global online grocery market is driven by convenience, providing a handy alternative to traditional retailers.
Due to consistent demand for goods, grocery and supermarket stocks, which are part of the consumer staples sector, provide effective hedges against market volatility. The industry remains resilient even during recessions because consumers cannot cut back spending on such essential items.
Take a detailed look at the stocks mentioned above:
Walmart Inc. (WMT)
WMT offers an assortment of merchandise and services at everyday low prices in both retail stores and through e-commerce websites. The company operates through three segments: Walmart U.S.; Walmart International; and Sam’s Club.
On June 27, 2023, WMT partnered with Genpact Limited (G) to support its finance and accounting operations in North America. This deal is a positive step forward in the collaborative collaboration of layering digital technologies into finance operations. WMT is projected to boost its financial skills and grow its market share due to this collaboration.
WMT’s forward EV/Sales of 0.78x is 54.6% lower than the industry average of 1.71x. Its forward Price/Sales of 0.68x is 40.2% lower than the industry average of 1.13x.
WMT’s trailing-12-month ROTC of 10.61% is 64.7% higher than the industry average of 6.44%. Its trailing-12-month asset turnover ratio of 2.53x is 186.6% higher than the industry average of 0.88x.
In the fiscal first quarter ended April 30, 2023, WMT’s total revenues increased 7.6% year-over-year to $152.30 billion. The company’s operating income improved by 17.3% from the year-ago value to $6.24 billion, while its attributable consolidated net income amounted to $1.67 billion in the same period. In addition, its adjusted EPS stood at $1.47, up 13.1% year-over-year.
The consensus revenue estimate of $634.71 billion for the year ending January 2024 represents a 4.7% increase year-over-year. Its EPS is expected to come in at $6.24 for the same period. It surpassed EPS estimates in all four trailing quarters.
WMT’s shares have gained 20.1% over the past year to close the last trading session at $159.11. The stock has a 24-month beta of 0.64.
WMT’s POWR Ratings reflect this promising outlook. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
WMT also has an A grade for Stability and Sentiment and a B for Momentum and Quality. It is ranked #5 out of 38 stocks in the A-rated Grocery/Big Box Retailers industry. Click here for the additional POWR Ratings for Growth and Value for WMT.
PriceSmart, Inc. (PSMT)
PSMT is an owner and operator of U.S.-style membership shopping warehouse clubs. Its warehouse clubs sell brand-name and private-label consumer products; essential goods; fresh produce; prepared foods, and fresh-baked goods, and provide services such as optical; tire center, and other ancillary services.
PSMT’s forward EV/Sales of 0.53x is 69.1% lower than the industry average of 1.71x. Its forward Price/Sales of 0.54x is 52.3% lower than the industry average of 1.13x.
PSMT’s trailing-12-month ROTC of 9.51% is 47.6% higher than the industry average of 6.44%. Its trailing-12-month ROTA of 6.06% is 47.9% higher than the industry average of 4.10%.
During the fiscal third quarter that ended on May 31, 2023, PSMT’s total revenue increased 6.4% year-over-year to $1.09 billion. Its operating income rose 27.5% from the prior-year quarter to $43.05 million. The company’s adjusted net income attributable to PSMT came in at $31.88 million and $1.02 per share, representing a 65.5% and 64.5% increase year-over-year.
Analysts expect PSMT’s revenue to increase 8.5% year-over-year to $4.41 billion for the year ending August 31, 2023. Its EPS is expected to grow 14.4% year-over-year to $3.87 for the same period. It surpassed EPS estimates in all four trailing quarters.
Over the past year, the stock has gained 17.3% to close the last trading session at $77.74. PSMT has a 24-month beta of 0.65.
PSMT’s POWR Ratings reflect strong prospects. It has an overall rating of A, which translates to a Strong Buy in our proprietary rating system. It has an A grade for Stability and a B grade for Sentiment, Value, and Momentum. It is ranked #10 in the same industry.
Beyond what is stated above, we’ve also rated PSMT for Growth and Quality. Get all PSMT ratings here.
Ingles Markets, Incorporated (IMKTA)
IMKTA operates a chain of supermarkets that offers food products, including grocery, meat and dairy products, produce, frozen foods, and other perishables, and non-food products, which including fuel centers, pharmacies, and health and beauty care products, general merchandise, and private label items.
IMKTA’s trailing-12-month EV/Sales of 0.34x is 80.4% lower than the industry average of 1.73x. Its trailing-12-month Price/Sales of 0.28x is 74.2% lower than the industry average of 1.08x.
IMKTA’s trailing-12-month ROCE of 19.98% is 92.6% higher than the 10.37% industry average, while its trailing-12-month ROTA of 10.59% is 151.2% higher than the industry average of 4.22%.
For the second quarter that ended on March 25, 2023, IMKTA’s net sales increased marginally from the year-ago value to $1.38 billion. Its total liabilities came in at $980.86 million for the period that ended March 25, 2023, compared to $1.04 billion for the period that ended September 24, 2022. Also, its total assets came in at $2.34 billion, compared to $2.30 billion for the same period.
The stock has gained 2.5% over the past month to close the last trading session at $84.70. The stock has a 24-month beta of 0.67.
It’s no surprise that IMKTA has an overall A rating, equating to a Strong Buy in our POWR Ratings system. It is ranked #7 in the same industry. It has an A grade for Value and a B grade for Stability and Quality. To see additional IMKTA’s ratings for Growth, Sentiment, and Momentum, click here.
43 Year Investment Pro Shares Top Picks
Steve Reitmeister is best known for his timely market outlooks & unique trading plans to stay on the right side of the market action. Click below to get his latest insights…
WMT shares were trading at $159.50 per share on Wednesday morning, up $0.39 (+0.25%). Year-to-date, WMT has gained 13.38%, versus a 19.00% rise in the benchmark S&P 500 index during the same period.
About the Author: Rashmi Kumari
Rashmi is passionate about capital markets, wealth management, and financial regulatory issues, which led her to pursue a career as an investment analyst. With a master's degree in commerce, she aspires to make complex financial matters understandable for individual investors and help them make appropriate investment decisions.3 Grocery Stocks With Tons of Stability to Buy This Week appeared first on StockNews.com