NEW YORK (TheStreet) -- How popular is Whole Foods Market (WFM) ? This purveyor of natural, organic and prepared foods and beverages is so beloved it made the cover of Fortune Magazine.

HowWhole Foods is Taking Over America may be overstated but from my own experience I can tell you the stores I've visited have become destinations for like-minded, loyal shoppers.

But as an investor am I willing to pay 34 times trailing earnings and nearly 27 times next year's for the pleasure of owning WFM's stock? Not at the moment, and not until I listen to the earnings conference call on May 6 after the markets close.

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Whole Foods' shares closed Thursday at $51. Since the first trading day of 2014, when the stock closed at $57.07, shares of Whole Foods Market have struggled and are down almost 12%.

The following one-year chart offers some visual metrics to help explain why.

WFM data by YCharts

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In spite of a healthy year-over-year quarterly retained earnings growth rate of nearly 42%, revenue growth has been unremarkable. The green line above speaks to why I'm not going to buy a stock with a forward (one-year) PE ratio of 27.

The company's diluted quarterly EPS year-over-year growth rate (green line) of less than 8% needs to improve significantly before I sense a margin of safety that helps to mitigate a stock's downside risk.

In fiscal year 2013, the company had sales of approximately $13 billion and currently has 374 stores in the United States, Canada and the United Kingdom. In December co-CEO and company co-founder John Mackey increased his long-term U.S. store count goal to an optimistic 1,200 from an earlier plan to reach 1,000.

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Mackey and his colleagues know the healthy, organic and natural products industry is growing by leaps and bounds. According to industry trackers, this rapidly expanding segment comprises a market of about $150 billion that is expected to grow by almost 50% in fewer than four years.

Whole Foods Market is the dominant player in this lucrative space and longer-term shareholders have profited handsomely. The stock price since its November 2008 Great Recession low is up 1,300% versus 135% for the S&P 500.

Even though the company has had its share of controversy and competition from rivals such as Natural Grocers by Vitamin Cottage(NGVC) - Get Report, seven million shoppers still visit Whole Foods' stores every week. Its hot-food bar and extensive salad bars are a big draw, and if you're on a diet don't go near the irresistible bakery found inside almost every location.

Expectations for first-quarter 2014 EPS and sales growth are low, which may set the stage for an upside surprise or two. I'm anticipating a 10% increase in EPS from the year-ago quarter and revenue to also be up 10% year over year.

The company's full fiscal-year financial numbers should be similar. Last year it surprised to the upside on three of four quarters, and this year it needs to hit it out of the park four quarters in a row to justify WFM's high PE ratios.

Three negative factors that could hold down Whole Foods Market shares are: a dividend yield that is barely 1%, an anemic trailing 12-month operating margin of less than 7% and a profit margin of only 4.2%.

If investors ignore the stock's high PE ratio and management guides favorably on May 6, my one-year price target for WFM is $58. In the meantime, look for share price volatility to help patient investors buy below $50.

At the time of publication the author had no positions in the companies mentioned.

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This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.


Marc Courtenay is the founder and owner of Advanced Investor Technologies, LLC, as well as the publisher and editor of