3 Reasons Whole Foods Market Is A Buy-Ranked Stock Now

Whole Foods Market (NASDAQ:WFM) is a high end grocery store chain that has taken America by storm in the last half a decade or so. The stock price has echoed the demand for higher quality food and premium grocery items, as WFM shares have surged a massive 1222.2% since late November of 2008. The stock has built a lot of share value over the last half a year too, creating significant momentum. Since September, the share price has swelled up 40%.

There are several reasons for why Whole Foods, unlike other grocery chains, believes it can triple the amount of stores it has now in the long run, pushing them up to a store count near 1,200. The stats suggest that Whole Foods Market just might be able to pull this feat off, as the company has some impressive metrics on its side.

Whole Foods outperforms the retail supermarket industry, it has promising growth rates, as well as positive earnings statistics. For these three reasons, we believe Whole Foods Market is positioned well to succeed in the long run. Indeed, it's no wonder this is a Zacks Rank #2 (Buy) and we are looking for outperformance from this company in the near term. Below, let's take a closer look at some of the key reasons for why WFM may see continued stock price gains ahead:

Outperforming the Industry

Whole Foods outperforms its peers in the industry on metrics which are key to long term success. For starters, Whole Foods has a trailing twelve month net profit margin of 4.02%, more than doubling the industry's, which is only 1.76%.

Additionally, the company has a trailing twelve month ROE of 15.09%, outperforming the industry's ROE of 13.94%. The most impressive stat for Whole Foods, however, is in the company's debt profile. Whole Foods has a debt to equity of 0.02, compared to 17.79 for the industry, meaning that other industry members have far more debt than WFM.

Growth

WFM has a good history of growth in the past 5 years. In that time, the company has managed to grow EPS at a rate of 22.3%, while the industry was stagnant for the most part, only growing EPS by 1.7% in that time.

This year, the expected EPS growth rate is 11.5%, while retail supermarkets as a whole are expected to shrink 8%. The current growth estimate for next year calls for a rate of 12.5% while the industry is expected to grow 7.2%.

Earnings Outlook

Among the most impressive stats are the ones surrounding earnings. A year ago this quarter, the EPS was $0.38. The EPS consensus for the current quarter is $0.42. The fact that it is higher from the actual results a year ago in this quarter lets us know that WFM is not stagnant in terms of growing earnings.

As a matter of fact, WFM has beaten our EPS consensus in each of the last 3 quarters by an average of 5.57%. Whole Foods Market is thus a great candidate to beat our EPS consensus when it reports its earnings on 5/5/15.

Lastly, there has been near universal agreement about WFM's prospects both in the near term and the long term. Not a single analyst has revised their earnings estimates lower for the company for either the current quarter or the current year in the past thirty days, suggesting total agreement on WFM's improving prospects.

Bottom Line

So if you are looking for a buy-ranked stock in the grocery space that can offer up gains, consider WFM. The company still has plenty of room to grow, and given its impressive margins and strong brand loyalty, the stock may remain a solid performer for investors in the near term too.

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