Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Whole Foods Market, Inc. (WFM): Reasons To Buy

Page 1 of 2

Whole Foods Market, Inc. (NASDAQ:WFM) owns and operates a chain of natural and organic foods supermarkets. This article will discuss key reasons to invest in Whole Foods.

Overview: Whole Foods Market

Whole Foods Markets is a leader in the organic food market sector. It continues to offer great value to investors looking to make long-term profits. And for those looking for an ethical and “green” investment, Whole Foods Market, Inc. (NASDAQ:WFM) offers produce and a variety of organic groceries plus prepared foods and catering. The natural food chain also supports sustainable agriculture and reducing waste and consumption of nonrenewable resources. Whole Food’s pro-environment mission is best reflected by its Whole Planet Foundation that was established to alleviate poverty in rural communities across the global village.

Let’s take a look at Whole Foods’ from a fundamental perspective.

Strengths

The organic outfit is dollar strong in many ways, including revenue growth, a solid financial position, a history of earnings per share growth, continued growth in net income and good cash flow from operations.

Whole Foods Market, Inc.The organic market king currently has a market cap of $15.8 billion, a P/E ratio of 32.00 – above the S&P 500 P/E ratio of 18.00; although shares are presently are down by about 6.5% in 2013. But Whole Foods Market, Inc. (NASDAQ:WFM)’ revenue in the first quarter of 3.5% beats other organic food stores. Revenues climbed by 13.7% since the end of the first quarter in 2012 which has pumped up the chains’ earnings per share by 20.0% in the most recent quarter compared to the same quarter a year ago – continuing a trend of positive earnings per share growth since 2011.

Analysts expect this trend to continue and for-see a $2.87 improvement in earnings this year compared to $2.52 in 2012. The company’s net income growth has consistently outperformed the S&P 500’s super market retail industry average. Net income increased by 23.4% compared to the same quarter in 2012 climbing from $118.33 million to $146.00 million.

Weaknesses

The company is not without some weak links in the chain, the first of which is its focus on the US market. This makes Whole Foods Market, Inc. (NASDAQ:WFM) vulnerable to weaknesses in the US economy. The markets’ organic nature also subjects the outfit to product recalls. The company has recalled several products because of possible contamination.

For example Whole Foods recalled its dairy free bakery products in January 2012 because they contained milk products not stated as such on the labels. In November 2010, the Austin, TX-based branches recalled seven types of cheddar cheese because of possible E. coli or listeria contamination. These contaminants continue to be a challenge for the broader organic market. In short, product recalls can taint Whole Foods Market, Inc. (NASDAQ:WFM)’s brand.

Opportunities

Whole Foods Markets will continue to be a leader in the growing organic market as more people become health conscious. This means an increasing demand for organic foods going forward.

Over the past three years natural product sales through retail channels have grown by almost 7% annually as more players enter the field, including larger supermarkets like Walmart and Costco. And the King Kullen chain has pushed its way into the market by offering organic and gluten free items on its shelves. The supermarket has also opened its line of organic stores, “Wild by Nature.”

Threats

Whole Foods Market, Inc. (NASDAQ:WFM) faces a number of challenges. In addition to increased competition, the product recalls mentioned above could become a greater challenge in the event of an outbreak of contamination like E-Coli or salmonella in the natural food chain. That chain could also be disrupted by changes in the availability of natural and organic products resulting from competitors increasing their natural and organic product offerings.

Whole Foods Market, Inc. (NASDAQ:WFM) must also contend with the likelihood of new laws and regulations. There is increasing governmental scrutiny of and public awareness regarding food safety. The possibility of selling contaminated food could trigger government legal actions, private lawsuits, product recalls and other liabilities. If this results in monetary settlements, that could impact Whole Foods’ profits.

Page 1 of 2
Loading Comments...