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Whole Foods: 'Food For Thought' or Wholly Expensive?

As a consequence, the company is seeing current comps in the areas of 7% -- much lower than the 8% to 9% investors had become accustomed to. With that in mind, the company is forecasting fiscal 2013 earnings of $2.88 to $2.87 per share -- falling short of analysts' estimates of $2.91. On the news, the stock fell almost 5%, which has cause me to wonder if the stock is now "food for thought" or still expensive particularly due to its P/E of 36.

Moving Forward

There aren't many companies in the retail sector, or any sector for that matter, that are performing as well as Whole Foods. Despite some near-term concerns regarding the effects of Sandy, Whole Foods remain one of the best-run businesses on the market. I don't think investors should focus too much on the company's guidance, which several analysts already consider extremely conservative.

What's more, it has become clear that the company has become equally disciplined in terms of its capital -- working hard to dismiss the "Whole Paycheck" moniker it has acquired by looking for ways to lower its prices.

While it will never reached the market dominated by Wal-Mart, Whole Foods certainly has become better positioned to compete more effectively with the likes of Fresh Market (TFM), Harris Teeter (HTSI) and Kroger (KR). While Whole Foods may still arrive more expensive than the latter two companies, the shopping experience alone should make up the difference since the company also sells the idea of a "lifestyle."

Bottom Line

Although the company did not issue its customary beat-and-raise performance, investors have to understand the long-term story for Whole Foods remains intact. With revenue growth still well above 20%, the company has not shown any meaningful signs that valuation should (at this point) be a concern.

Having said that, I would not dismiss any indicators suggesting that comps have started to deteriorate. The first quarter of 2013 may be rocky, but I think it is safe to wait until Q2 and possibly Q3 of next year to say with any degree of certainty that the stock can no longer work. For investors, here's some food for thought -- buy Whole Foods on any signs of weakness.

At the time of publication, the author held no position in any of the stocks mentioned.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

Richard Saintvilus is a private investor with an information technology and engineering background and has been investing and trading for over 15 years. He employs conservative strategies in assessing equities and appraising value while minimizing downside risk. His decisions are based in part on management, growth prospects, return on equity and price-to-earnings as well as macroeconomic factors. He is an investor who seeks opportunities whether on the long or short side and believes in changing positions as information changes.
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