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Whole Foods Market: Lowest Analyst Ratings in Its Peer Group

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Feb. 13 2017, Updated 9:06 a.m. ET

Supermarkets continue their slide in 2017

After an unimpressive 2016, supermarket stocks continued their slide in 2017. Whole Foods Market (WFM), Kroger (KR), Sprouts Farmers Market (SFM), and SuperValu (SVU) are down 4.7%, 4.8%, 4.3%, and 20%, respectively, YTD (year-to-date).

Whole Foods Market stock is currently trading 21.4% below its 52-week high price. The stock has lost about 50% of its value over the last three years. WFM released its fiscal 1Q17[1. quarter ended January 15, 2017] results on February 8, 2017, after the market closed. Its stock price fell 1.5% in after-hours trading.

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Comparing WFM’s valuations to its peers

As a result of its falling stock price, Whole Foods Market’s valuations have also come down. The company is currently trading at a one-year forward price-to-earnings ratio of 20.5x, compared to 40x in 2013.

However, Kroger and SuperValu still trade at a discount to the organic food player and are valued at 15.4x and 9.7x, respectively.

Wall Street’s view of WFM

Whole Foods Market (WFM) is covered by 26 analysts, and it received a rating of 3.2 on a scale of 1 (strong buy) to 5 (sell). In comparison, Sprouts Farmers is rated 2.1, Kroger is rated 2.2, and SVU is rated 2.6.

Of the 26 analysts that cover WFM, 23% gave it a “buy” recommendation, 50% recommended a “hold,” and 27% recommended a “sell.” Whole Foods Market has the most “sell” ratings in its peer group. In comparison, only 8% of analysts recommended a “sell” for Kroger, while no analysts recommended a “sell” for Sprouts or SuperValu.

The average target price on Whole Foods Market stock is $29.45, which indicates an upside potential of just 1%. Sprouts and SuperValu, in comparison, have upside potential of 29% and 35% based on the target prices assigned by Wall Street analysts.

ETF investors seeking to add exposure to Whole Foods Market can consider the Guggenheim S&P 500 Equal Weight Consumer Staples ETF (RHS), which invests 2.4% of its portfolio in the company.

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