Whole Foods (WFM) reported another strong quarter after the close Tuesday night, and the stock price followed suit today, closing up $9 or 10% to $102 on 4(x) average volume.
Revenues rose 13% year-over-year (y/y), operating income rose 20% and earnings per share (EPS) rose 19% for the specialty retailer, as management’s tempered guidance last quarter never materialized.
WFM is trading at 14(x) cash-flow which is actually cheaper than a lot of consumer staples are valued on a cash-flow basis.
The stock traded above its previous all-time high today of $101.86, from early October, 2012.
Technically, today’s trading action looks like a fresh breakout for WFM, and although the valuation is a little lofty, the fundamentals and continued market share gains are supportive of that valuation.
Our internal model has an intrinsic value on WFM of $133 per share, and that was pre-earnings.
We think WFM could be good for at least another $20 of upside, with a supportive market that we see today. (That is not a prediction, but an educated guess. )
We’d own more on a pullback too.
Trinity Asset Management, Inc. by:
Brian Gilmartin, CFA
Portfolio manager