Why You Should Not Buy Whole Foods Market
Disclosure: I am short WFM. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Shares of Whole Foods Market, Inc. (WFM) have steadily returned 48.57% over the past 12 months. At $97.70 per share, the stock is trading at very close to its 52-week high of $98.47 achieved recently. The company's fundamentals are solid and its business is riding on the tailwind of healthy foods increasingly becoming the popular choice of consumers. However, a quality company's stock does not necessarily represent a quality investment. In this article, I will illustrate the thoughts that helped in formulating my investment decision on WFM shares.
My analysis performed below is primarily based on a set of WFM's comparable peers such as The Fresh Market (TFM) and The Kroger Co. (KR). The stock value is estimated by equally weighting the valuations calculated by five different peer-average trading multiples (see comparable analysis table below).
Firstly, let's take a look at WFM's financial strengths:
1. Analysts on average predict WFM's revenue, EBITDA, and EPS to rise by 2-year CAGRs of 14.1%, 20.3%, and 22.3% over the current and next fiscal years (see table above). The rates are substantially higher than the peer averages of just 6.5%, 7.4%, and 15.9%, respectively. READ FULL ARTICLE HERE