TSC Ratings' Updates: Whole Foods

We've downgraded Whole Foods Market(WFMI Quote) from hold to sell, driven by its deteriorating net income, disappointing return on equity, weak operating cash flow, generally weak debt management and generally disappointing historical performance in the stock itself.

Net income decreased by 95.6% over the same quarter a year ago, to $1.5 million, significantly underperforming the S&P 500 and the food and staples retailing industry. ROE has slightly decreased, implying a minor weakness. Whole Foods' ROE is significantly below that of the industry average and is below that of the S&P 500. Net operating cash flow has decreased to $58.57 million, or 39.66% when compared with the same quarter last year. The debt-to-equity ratio of 0.62 is somewhat low overall, but it is high when compared to the industry average. The company's quick ratio of 0.22 is very low and demonstrates very weak liquidity.

Shares are down 79.63% on the year, underperforming the S&P 500. Consistent with the plunge in the stock price, the company's earnings per share are down 95.83% compared with the year-earlier quarter. The fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.

Other ratings changes include Global Industries(GLBL Quote), downgraded from hold to sell, and Rand Capital(RAND Quote), upgraded from hold to buy.

All ratings changes generated on Nov. 6 are listed below.

Ticker	Company	Current	Change	Previous
BBNK	Bridge Capital	SELL	Downgrade	HOLD
CAM	Cameron International	HOLD	Downgrade	BUY
CKSW	ClickSoftware	BUY	Upgrade	HOLD
DOV	Dover	HOLD	Downgrade	BUY
ELNK	Earthlink	HOLD	Downgrade	BUY
ENZN	Enzon	SELL	Downgrade	HOLD
FMS	Fresenius	HOLD	Downgrade	BUY
GAXC	Global Axcess	SELL	Downgrade	HOLD
GLBL	Global Industries	SELL	Downgrade	HOLD
ISBC	Investors Bancorp	HOLD	Upgrade	SELL
PER	Perot Systems	HOLD	Downgrade	BUY
PPDI	Pharmaceutical Product Development	HOLD	Downgrade	BUY
RAND	Rand Capital	BUY	Upgrade	HOLD
ROLL	RBC Bearings	HOLD	Downgrade	BUY
SLB	Schlumberger	HOLD	Downgrade	BUY
UCFC	United Community	SELL	Downgrade	HOLD
WFMI	Whole Foods	SELL	Downgrade	HOLD

Each business day, TheStreet.com Ratings updates its ratings on the stocks it covers. The proprietary ratings model projects a stock's total return potential over a 12-month period, including both price appreciation and dividends. Buy, hold or sell ratings designate how the Ratings group expects these stocks to perform against a general benchmark of the equities market and interest rates.

While the ratings model is quantitative, it uses both subjective and objective elements. For instance, subjective elements include expected equities market returns, future interest rates, implied industry outlook and company earnings forecasts. Objective elements include volatility of past operating revenue, financial strength and company cash flows.

However, the rating does not incorporate all of the factors that can alter a stock's performance. For example, it doesn't always factor in recent corporate or industry events that could affect the stock price, nor does it include recent technology developments and competitive dynamics that may affect the company.

For those reasons, we believe a rating alone cannot tell the whole story, and that it should be part of an investor's overall research.