With shares of Whole Foods (NASDAQ:WFM) trading around $85, is WFM an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

C = Catalyst for a Stock’s Movement

Whole Foods is a natural and organic foods supermarket that operates in the United States, Canada, and the United Kingdom. As consumers become more health conscious, they are demanding new products at an increasing rate that Whole Foods is able to provide. The natural and organic food trend sees no signs of slowing so look for Whole Foods to continue its dominance in this space for years to come.

T = Technicals on the Stock Chart are Mixed

Whole Foods is a resilient stock that is trading near all-time highs. Since its initial public offering, the stock has seen massive gains with some minor periods of consolidation. Whole Foods has been in a beautiful uptrend that extends back to late 2008. Currently, the stock is seeing a pullback and some consolidation but look for the trend to resume once this inevitable corrective process is complete.

A price trend and its strength can be identified with the use of key simple moving averages. The key simple moving averages are the 50-day, 100-day, and 200-day simple moving averages. What are these averages doing in Whole Foods? The stock is currently trading below all of its key moving averages. What does this signal? Whole Foods is still in a pullback and consolidation mode so it may be a little time before it is good to go once again.

A simple way to gain perspective into investor sentiment is through the use of the options market. More specifically, taking a look at the implied volatility and implied volatility skew levels of Whole Foods options may help determine if investors are bullish, neutral, or bearish. The implied volatility of Whole Foods options is at 15.67 percent today which coincides with a zero percentile over the last 30 trading days and zero percentile over the last 90 trading days. What does this mean? This means that investors or traders are buying a very small amount of call and put options contracts, as compared to the last 30 and 90 trading days.

The implied volatility skew of April and May put and call options is at about average. So as of today, there is an average demand from call and put buyers or average supply of call and put sellers, all neutral over the next two months. Investors are buying a minimal amount of call and put option contracts and are leaning neutral over the next two months.

E = Earnings Are Increasing Quarter-Over-Quarter

Rising earnings and revenue growth figures are important because they are tied to a rising stock price. What do the last four quarterly earnings and revenue growth figures for Whole Foods look like? The last four quarterly earnings growth (Y-O-Y) rates have been: 20, 46.34, 26, and 25.49 percent while the last four revenue growth (Y-O-Y) rates have all been: 13.71, 23.64, 13.65, and 13.6 percent. Whole Foods has displayed double-digit earnings and revenue growth rates but they seem to have slowed in the latest quarter.

More importantly, how did the markets like these numbers? The last four quarterly earnings announcement reactions help gauge investor sentiment on Whole Foods’s stock. The last four quarters have seen next trading session returns of -9.7, -5.85, 11.32, and 7.56 percent. The markets have not been satisfied with the last two reported quarters.

E = Excellent Relative Performance Versus Peers and Sector

Whole Foods has been a leader over the last few years but how has the stock done, relative to its peers and sector, year-to-date? Year-to-date, the stock is returning -6.98 percent while its competitors, Kroger (NYSE:KR), Safeway (NYSE:SWY), Fresh Market (NASDAQ:TFM), and sector are returning 16.8, 29.54, -18.6, and 10.39 percent respectively. Year-to-date, Whole Foods has been trailing its peers and sector by a wide margin.


Whole Foods is deeply involved in a natural and organic food trend that is poised to continue. This trend has taken it a long way as the stock is trading near all-time high prices that are supported by double-digit earnings and revenue growth rates. However, Whole Foods has not performed so well relative to its peers and sector. WAIT AND SEE what Whole Foods does in the coming quarter.

Copyright Wall St. Cheat Street. All rights reserved.