Why Whole Foods Market (WFM) Stock Is Up Today

NEW YORK (TheStreet) -- Whole Foods Market  (WFM) rose sharply Tuesday morning amid rumors that billionaire activist investor Carl Icahn could take a position in the supermarket chain.

TheStreet's Doug Kass, among others, have noted chatter on Twitter  (TWTR) that Icahn is interested in some stake in the company.

The stock was up 4.62% to $39.71 at 10:43 a.m. Nearly 10 million shares had changed hands, compared to the average volume of 8,465,240.

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Separately, TheStreet Ratings team rates WHOLE FOODS MARKET INC as a "buy" with a ratings score of B-. TheStreet Ratings Team has this to say about their recommendation:

"We rate WHOLE FOODS MARKET INC (WFM) a BUY. This is driven by a number of strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, growth in earnings per share, increase in net income, good cash flow from operations and largely solid financial position with reasonable debt levels by most measures. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth came in higher than the industry average of 4.3%. Since the same quarter one year prior, revenues rose by 10.4%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • WHOLE FOODS MARKET INC has improved earnings per share by 7.9% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. 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 ($1.53 versus $1.47).
  • The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and the Food & Staples Retailing industry average. The net income increased by 6.3% when compared to the same quarter one year prior, going from $142.00 million to $151.00 million.
  • 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. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.89 is somewhat weak and could be cause for future problems.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Food & Staples Retailing industry and the overall market on the basis of return on equity, WHOLE FOODS MARKET INC has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
  • You can view the full analysis from the report here: WFM Ratings Report

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

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.

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