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Whole Foods Market (WFM)

Whole Foods Market (WFM). Ewa Nelip Module 3 Market Multiple Valuation. Competitors profitability comparison. Whole Foods is a lot profitable than other companies in the grocery stores industry It comes from the fact that WFM provides premium products and therefore can charge higher prices.

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Whole Foods Market (WFM)

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  1. Whole Foods Market (WFM) Ewa Nelip Module 3 Market Multiple Valuation

  2. Competitors profitability comparison • Whole Foods is a lot profitable than other companies in the grocery stores industry • It comes from the fact that WFM provides premium products and therefore can charge higher prices

  3. Organic foods industry • $ 63 bn revenue worldwide • $ 31.5 bn revenue in the United States up from $ 1 bn in 1990 • 2002-2011 average growth was 19% per year • 12% expected growth for 2014

  4. Whole foods competitors in the organic foods industry • Safeway • Harris Teeter (FDA approved purchase by Kroger) • Trader Joe’s • Hannaford • Albertsons • Food Lion • Publix Supermarkets • Most of these companies are not publicly traded and therefore information is hard to obtain.

  5. Comparison of multiples

  6. EPAT multiple Price as of 1/25/2014: $51.61

  7. Net income multiple Price as of 1/25/2014: $51.61

  8. Net enterprise assets multiple Price as of 1/25/2014: $51.61

  9. Sales multiple Price as of 1/25/2014: $51.61

  10. Book value multiple Price as of 1/25/2014: $51.61

  11. Recommendation • Even though the multiples implicate that Whole Foods stock price is highly overvalued I believe it is due to the fact that the comparable companies are not truly comparable. • Grocery stores industry is a mature industry with little growth potential and cost leadership competition. • Organic foods industry has a lot more potential for growth (especially with current health and wellness trends). • High P/E ratio supports the room for growth for Whole Foods. • Overall recommendation: BUY

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