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Good day!

Reading about Kroger and Safeway this morning and I couldn't for the life of me figure out how the future value was determined for both of their stocks.

"With Kroger trading at a 1999 P/E of 21 and a 2000 P/E of 17.7, Husson might be right. In addition, Kroger's trailing price-to-sales ratio is 0.45. In other words, each share is trading at a discount to the sales it will generate. Put another way, each share is generating $52.97 in sales, yet selling for around $24.19."

Where is that $52.97 coming from, exactly?

"Competitor Safeway (NYSE: SWY) is trading at a 1999 P/E of 23.6 and at a price-to-sales ratio of 0.91. Each share is generating $49.22 in sales and is trading around $44.56. Kroger, therefore, may be worth another look."

Same here; where's the $49.52 coming from, exactly?

Thanks in advance for an answer!

David.

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David --

<<Reading about Kroger and Safeway this morning and I couldn't for the life of me figure out how the future value was determined for both of their stocks...

"Competitor Safeway (NYSE: SWY) is trading at a 1999 P/E of 23.6 and at a price-to-sales ratio of 0.91. Each share is generating $49.22 in sales and is trading around $44.56. Kroger, therefore, may be worth another look."

Same here; where's the $49.52 coming from, exactly?>>

Let me try to explain. First, these snippets seem to be addressing the companies' present valuations more than their future ones. Here's how I believe the $49.52 was figured:

It says that Safeway is generating $49.22 in sales per share. That tells me that to get that number, I need two numbers: the amount of sales and the number of shares. I'll simply divide the former by the latter.

So I looked up Safeway's 1998 sales (You could alternatively use the sales for the trailing 12 months): about $24.5 billion. How many shares outstanding? about 500 million (or 0.5 billion, to express the numbers in the same way). Divide $24.5 by 0.5 and you get: $49.

Hope that helps!

Selena
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