Here’s the thing about Kroger Co (NYSE:KR): America’s largest grocer was a screaming buy after the market overreacted to Amazon.com, Inc. (NASDAQ:AMZN) buying Whole Foods Market, Inc. (NASDAQ:WFM) and sold off KR stock. KR stock dropped to $20 and was trading at five-times trailing EBITDA.

But KR stock has bounced since then. And now that it is a $30 stock trading at 7.5-times trailing EBITDA (in-line with trailing five-year average), it no longer is a buy.

At best, this stock feels fairly valued at these levels. Competition is still rising from a suite of competitors, including Whole Foods, Wal-Mart Stores Inc (NYSE:WMT), and Target Corporation (NYSE:TGT). Comps are positive, but they are pretty slow relative to the competition.

Margins are trending higher, but don’t have a bunch of expansion potential in front of them.

Overall, this is a low-growth story. And KR stock is priced appropriately, assuming Chinese internet giant Alibaba Group Holding Ltd (NYSE:BABA) doesn’t pull the trigger and buy America’s biggest grocer.

Can Alibaba Send Kroger Stock Higher?

Multiple news outlets have reported recently that Alibaba and Kroger are in “discussions.” Those discussions have been confirmed by Alibaba, but the extent of those discussions remains a question mark.

Some reporters are saying that Alibaba is thinking about outright buying Kroger (similar to Amazon’s acquisition of Whole Foods). Other reporters are saying that the two simply talked about expanding Alibaba’s payment system, AliPay.

Directly from the source, an Alibaba spokesperson implied that the discussions revolved around Kroger potentially growing share among Chinese consumers.

So what is actually happening behind closed doors? No one really knows. But it is unlikely that Alibaba outright buys Kroger.

There is a possibility. With Amazon buying Whole Foods, JD.Com Inc(ADR) (NADSAQ:JD) pushing into offline retailer, Walmart acquiring Jet.com and Alibaba taking a massive stake in China’s Walmart, the marriage of online and offline retail is a phenomena happening globally.

Online retailers want to expand their offline retail presence in order to widen their reach and maximize sales conversions.

Moreover, Alibaba specifically wants to grow its reach among U.S. businesses and consumers. Acquiring Kroger would be a cheap way to do that en masse. Kroger operates 2,800 stores across 35 states. Whole Foods operates only 470 stores.

In this sense, acquiring Kroger would give Alibaba a retail footprint nearly six times as large as Amazon’s retail footprint.

Alibaba could do any number of things with that footprint. Namely, they could grow mind-share among US consumers and bolster their online business. Because KR stock trades at just 0.4x EV/Sales and 7.6x EV/EBITDA, Alibaba could acquire a huge footprint at a reasonable price.

But in the grander scheme, Alibaba won’t pull the trigger. At least not any time soon.

The two will likely partner and that could provide a nice boost to Kroger’s numbers, but it will likely be some time before Alibaba seriously considers paying somewhere north of $40 billion for an entry into the U.S. market. Alibaba will likely explore other options for a long time before dolling out $40 billion.

Without an Alibaba Takeover, What Is Kroger Stock’s Value?

Without a takeover, Kroger stock looks maxed out here and now.

Operations are improving, and comparable sales growth is not only back in positive territory, but also trending up. This growth is being driven by sustainable catalysts, including private-label growth, an organic foods push, and ClickList.

Gross margins are also inflecting upward thanks to the company negotiating vendor costs down and pushing higher-margin organic foods (healthier sales mix is additive to overall margin profile).

Operating margins will start to improve thanks to the company’s cost-saving Restock Kroger initiative, which will add roughly $400 million in incremental profit over the next three years.

But even with all that, this is just a low single-digit revenue growth narrative with good, but not great, margin drivers. Growth won’t be supercharged anytime soon because even with Alibaba’s help, the competition is still only getting stiffer.

Consequently, I think this is a mid single-digit earnings growth story over the next several years (versus the 10%-plus growth story it has been for the better part of the past five years).

But Kroger stock is now trading at multiples that are close to being in line with their five-year averages. That doesn’t make much sense. Lower growth warrants a lower multiple.

Bottom Line on KR Stock

Alibaba rumors could keep the stock afloat and even cause it to trade higher in the near-term, but longer-term, this stock won’t deliver out-sized returns from this elevated level.

As of this writing, Luke Lango was long BABA, AMZN, JD, and TGT.