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Whole Foods Market (WFM) Marked As A Barbarian At The Gate

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

Trade-Ideas LLC identified Whole Foods Market ( WFM) as a "barbarian at the gate" (strong stocks crossing above resistance with today's range greater than 200%) candidate. In addition to specific proprietary factors, Trade-Ideas identified Whole Foods Market as such a stock due to the following factors:

  • WFM has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $219.9 million.
  • WFM has traded 6.4 million shares today.
  • WFM traded in a range 202.8% of the normal price range with a price range of $1.61.
  • WFM traded above its daily resistance level (quality: 29 days, meaning that the stock is crossing a resistance level set by the last 29 calendar days. The resistance price is defined by the Price - $0.01 at the time of the signal).

Stocks matching the 'Barbarian at the Gate' criteria are worthwhile stocks to watch for a variety of factors including historical back testing and volatility. Trade-Ideas targets these opportunities because the stock is exhibiting an unusual behavior while displaying positive price action. In this case, the stock crossed an important inflection point; namely, 'resistance' while at the same time the range of the stock's movement in price is more than twice its normal size. This large range foreshadows a possible continuation as the stock moves higher.

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More details on WFM:

Whole Foods Market, Inc. operates as a retailer of natural and organic foods. The stock currently has a dividend yield of 1.3%. WFM has a PE ratio of 25.1. Currently there are 10 analysts that rate Whole Foods Market a buy, 1 analyst rates it a sell, and 9 rate it a hold.

The average volume for Whole Foods Market has been 6.1 million shares per day over the past 30 days. Whole Foods Market has a market cap of $13.9 billion and is part of the services sector and retail industry. The stock has a beta of 0.69 and a short float of 6.7% with 4.48 days to cover. Shares are down 33.6% year-to-date as of the close of trading on Wednesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Whole Foods Market as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures and expanding profit margins. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself.

Highlights from the ratings report include:

  • The revenue growth came in higher than the industry average of 6.5%. Since the same quarter one year prior, revenues slightly increased by 9.7%. This growth in revenue does not appear to have trickled down to the company's bottom line, displaying stagnant earnings per share.
  • WFM's debt-to-equity ratio is very low at 0.02 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.14, which illustrates the ability to avoid short-term cash problems.
  • WHOLE FOODS MARKET INC reported flat earnings per share in the most recent quarter. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, WHOLE FOODS MARKET INC increased its bottom line by earning $1.47 versus $1.26 in the prior year. This year, the market expects an improvement in earnings ($1.54 versus $1.47).
  • 38.47% is the gross profit margin for WHOLE FOODS MARKET INC which we consider to be strong. Regardless of WFM's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, WFM's net profit margin of 4.27% compares favorably to the industry average.
  • The net income growth from the same quarter one year ago has exceeded that of the Food & Staples Retailing industry average, but is less than that of the S&P 500. The net income has remained constant at $142.00 million when compared to the same quarter one year ago.

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