TSC Ratings' Updates: Whole Foods

Shares are down 31.8% on the year, apparently dragged down by the decline we have seen in the S&P 500. In one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.

We've downgraded oilfield services company Schlumberger(SLB Quote) from buy to hold. Strengths include its growth in earnings per share, increase in net income and robust revenue growth. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself and premium valuation.

EPS improved by 14.7% in the most recent quarter compared with the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years that we feel should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, Schlumberger increased its bottom line by earning $4.19 vs. $3.01 in the prior year. This year, the market expects an improvement in earnings to $4.76. Net income rose 12.7% over the same quarter a year ago, to $1,526.36 million. Gross profit margin of 38.3% is strong, but it has decreased from the same period last year. Schlumberger's net profit margin of 21% trails the industry average.

Shares are down 48.57% from a year ago, which is worse than the S&P 500's performance, but don't assume that it can now be tagged as cheap and attractive. Based on its current price in relation to its earnings, Schlumberger is still more expensive than most of the other companies in its industry.