Whole Foods Market Valuation

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Whole Foods Market Valuation

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SummaryRecommendationBUYPrice Range$58.93-$61.70DCF Valuation SummaryRelative Valuation SummaryCurrent Price$53.81Current Price$53.81NTM P/E Ratio$58.939.51%UndervaluedImplied Price$61.7014.67%UndervaluedNTM TEV/EBITDA Multiple$60.0111.52%UndervaluedInput AssumptionsCapital IQ AssumptionsMarket Risk Premium6.00%Company NameWhole Foods Market, Inc.Risk Free Rate3.80%TickerNasdaqGS:WFMTerminal EBITDA Multiple15.5Current Price53.81Cost of Debt2.99%Total Debt$27.00Cost of Preferred0.00%Total Preferred-WFM Corporate Tax Rate40.46%Minority Interest-WACC6.98%Market Cap$20,044.90Implied Terminal Growth Rate1.25%Cash and Equivalents$989.00Shares Outstanding372.50Latest FYE9/30/12Latest FQE6/30/13Valuation Date9/4/13

WACCWACC AnalysisValuation Date9/4/13Bottom-Up Beta CalculationNameTickerCurrent Stock PriceShares OutstandingBetaTotal DebtMkt. Value EquityDebt/EquityUnlevered BetaFamily Dollar Stores, Inc.NYSE:FDO70.29115.000.12735.48,083.49.10%0.1138339Harris Teeter Supermarkets, Inc.NYSE:HTSI49.0549.500.79215.42,426.08.88%0.7503340The Fresh Market, Inc.NasdaqGS:TFM26.9122.801.09934.5612.5152.57%0.5711560Safeway, Inc.NYSE:SWY25.85241.300.725,693.86,237.691.28%0.4664746The Kroger Co.NYSE:KR49.0748.200.3846.92,366.01.98%0.3755674Ingles Markets, Inc.NasdaqGS:IMKT.A37.34518.200.478,891.019,351.245.95%0.3690444Whole Food Market, Inc.NasdaqGS: WFM53.81372.51.0727.020044.90.0013469761.0691425589AverageAverage Unlevered Beta0.53079WFM D/E Ratio0.00135WFM Tax Rate40.46%WFM Levered Beta0.5312AssumptionsWACCRisk Free Rate (Rf)3.80%Market Risk Premium6.00%Market Risk Premium (Rm - Rf)6.00%WFM Bottom-Up Beta0.53Tax Rate40.46%Adjusted Market Risk Premium3.19%Risk-Free Rate of Return3.80%D/(D+P+E)0.13%Cost of Equity6.99%D/E0.13%WFM Cost of Debt2.99%Cost of Debt (Rd)2.99%(BBB- Rated)WFM Tax Rate40.46%After-Tax Cost of Debt1.78%InputsWeight of Equity99.87%Company Name:Whole Foods Market, Inc.Weight of Debt0.13%NasdaqGS:WFMWACC6.98%Total Debt27.00Preferred Equity-Minority Interest-Market Cap20,044.90Cash and Equivalents989.00Shares outstanding372.50Current Price$53.81

Jake Donovan: 30 YR T-Bond Yield as of 9/4/2013Jake Donovan:Average effective tax rate for years 2008-2012.

DCFPROJECTED CASH FLOWS(USD in millions, except per share data)9969979989991000Fiscal Year Ending September 30, 2013200820092010201120122013E2014E2015E2016E2017E2018E201920202021E2022EAveragesTotal Revenue7,953.98,031.69,005.810,107.811,698.813,687.616,151.418,816.421,450.723,810.325,596.027,003.827,948.928,507.928,793.0Revenue Growth1.0%12.1%12.2%15.7%17.0%18.0%16.5%14.0%11.0%7.5%5.5%3.5%2.0%1.0%11.62%EBIT274.3330.4450.5557.1754.61,095.01,292.11,599.41,823.32,023.92,303.62,430.32,515.42,708.32,879.3EBIT Margin3.4%4.1%5.0%5.5%6.5%8.0%8.0%8.5%8.5%8.5%9.0%9.0%9.0%9.5%10.0%5.42%Taxes92.0104.1165.9209.1286.5384.5454.4563.5643.0714.2802.1846.4876.2943.71003.6Tax Rate40.5%44.5%41.5%40.3%37.9%38.1%35.5%35.5%35.5%35.5%35.5%35.0%35.0%35.0%35.0%35.0%38.66%Depreciation and Amortization249.2266.7275.6287.1311.61,916.32,261.22,634.33,003.13,333.43,583.43,780.53,912.93,991.14,031.0Depreciation/Net Fixed Assets13.1%14.1%14.6%14.4%14.2%14.0%14.0%14.0%14.0%14.0%14.0%14.0%14.0%14.0%14.0%14.06%Capital Expenditures529.5314.6256.8365.0456.22324.22729.33140.63503.63781.83922.74048.04092.44097.34085.2Capital Expenditures/Net Fixed Assets27.9%16.6%13.6%18.3%20.8%21.0%20.5%20.0%19.0%19.0%19.0%19.0%19.0%19.0%19.0%19.69%Net Fixed Assets1,900.11,897.91,886.11,997.22,192.72,600.63,068.83,575.14,075.64,523.94,863.25,130.75,310.35,416.55,470.7Net Fixed Assets/Revenue23.9%23.6%20.9%19.8%18.7%19.0%19.0%19.0%19.0%19.0%19.0%19.0%19.0%19.0%19.0%20.99%Non-Cash Working Capital(74.1)(58.8)(48.1)(80.5)(94.8)(102.7)(121.1)(141.1)(160.9)(178.6)(192.0)(202.5)(209.6)(213.8)(215.9)Non-Cash Working Capital/Revenue(0.9%)(0.7%)(0.5%)(0.8%)(0.8%)(0.8%)(0.8%)(0.8%)(0.8%)(0.8%)(0.8%)(0.8%)(0.8%)(0.8%)(0.8%)-0.76%Change in Non-Cash Working Capital15.3310.69-32.45-14.25-7.87-18.48-19.99-19.76-17.70-13.39-10.56-7.09-4.19-2.14Free Cash Flow to the Firm310.4388.0549.5699.5879.01,175.71,327.01,466.71,662.61,823.7310.4388.0549.5699.5879.01,175.71,327.01,466.71,662.632223.6353336282PV of Yearly Cash Flows$22,022.913,068.83,575.14,075.64,523.94,863.25,130.75,184.9429.6500.5570.6633.4680.9718.3765.9Present Value of Equity as of 9/3/2013DCF AssumptionsEnterprise Value22,022.9Beta0.531Less:Long Term Debt Debt27.0Shares Outstanding372.5Plus:Cash and Equivalents989.0WACC6.98%Equity Value22,984.9Term. Growth Rate1.25%Shares Outstanding372.5Implied Per Share Value61.70Tax Rate40.5%Current Price53.81Value to Current Price14.7%UndervaluedEV / ttm EBITDA20.99

RVRatioProfitEfficiencyGrowthRiskCompany (Exchange:Ticker)P/E NTMEV/EBITDA NTMGross MarginNet Income MarginEBITDA MarginNTM EPSDividend YieldReturn on AssetsReturn on EquityRevenue GrowthNet Income GrowthDividend GrowthHistorical BetaDebt to EquityCurrent Stock PriceMarket Cap1 Year5 Years CAGR1 Year5 Year CAGR1 Year5 Year CAGRFamily Dollar Stores, Inc.NYSE:FDO17.38.834.00%4.12%9.00%4.061.50%12.20%29.80%12.66%8.40%0.27%14.17%14.10%13.14%0.1248.30%70.298,083.4Harris Teeter Supermarkets, Inc.NYSE:HTSI19.46.630.00%2.35%7.20%2.531.20%6.10%10.50%3.66%3.57%115.62%3.31%9.26%4.65%0.7919.90%49.052,426.0The Fresh Market, Inc.NasdaqGS:TFM11.36.722.10%0.49%5.80%2.262.40%4.80%4.40%4.18%3.74%-54.99%-19.83%0.00%0.00%1.09234.40%26.91612.5Safeway, Inc.NYSE:SWY18.56.827.70%1.20%5.10%1.403.10%4.70%20.80%7.49%0.37%-2.42%-10.57%18.85%20.13%0.72177.80%25.856,237.6The Kroger Co.NYSE:KR28.712.234.20%4.90%11.30%1.710.00%17.30%34.40%15.63%-15.47%---0.3818.70%49.072,366.0Ingles Markets, Inc.NasdaqGS:IMKT.A13.16.221.10%1.57%4.60%2.861.60%7.40%35.80%6.25%6.11%152.71%4.58%25.56%12.40%0.47172.90%37.3419,351.2Whole Foods Market, Inc.NasdaqGS:WFM32.413.835.80%4.22%9.40%1.660.80%10.50%14.60%15.35%10.20%26.63%29.85%42.31%-1.05%1.070.70%53.8120,044.9Target35.515.5Average20.18.729.27%2.69%7.49%2.351.51%9.00%21.47%9.32%5.40%36.18%3.59%18.35%8.21%0.6696.10%44.628,445.94Median18.56.830.00%2.35%7.20%2.261.50%7.40%20.80%7.49%4.93%15.47%3.95%16.48%8.53%0.7248.30%49.056,237.60Price/Earnings NTMHistoric Price/EarningsEV/EBITDA NTMHistoric EV/EBITDATarget Price/Earnings35.5LTMTarget Multiple15.5LTMNTM EPS1.66201216.68NTM EBITDA1,380.1201239.97Target Price$58.93201113.32Total Enterprise Value21,391.6201171.78Current Price53.8120109.11Less:201023.47Value to Current Price9.51%20097.70Debt27.0200920.88Undervalued20087.12Minority Interest0.0200817.64Plus:Cash989.0Equity Value$22,353.55Shares Outstanding372.5Target Price$60.01Current Price53.81Value to Current Price11.52%Undervalued

Financial DataWhole Foods Market, Inc. (NasdaqGS:WFM) > My Whole Foods Market, Inc. Quick Comp > Quick Comparable Analysis > Financial DataDetailsTemplate:Capital IQ Default CompsCurrency:US DollarAs-Of Date:Sep-04-2013Company Comp SetCompany NameDay Close Price LatestShares Outstanding LatestMarket Capitalization LatestLTM Net DebtFQ3 2013 Total DebtLTM Total Pref. EquityLTM Minority InterestTotal Enterprise Value LatestLTM Tangible Book Value/ShareLTM Filing Date, Income StatementLTM Total RevenueLTM EBITDALTM EBITLTM Diluted EPS Excl. Extra ItemsNTM Revenue (Capital IQ)NTM EBITDA (Capital IQ)NTM EPS (Capital IQ)Family Dollar Stores Inc. (NYSE:FDO)70.29115.08,083.4585.3735.4--8,668.713.23Jul-10-201310,253.3927.5693.43.6410,919.71988.294.06Harris Teeter Supermarkets, Inc. (NYSE:HTSI)49.0549.52,426.05.1215.4--2,431.121.2Aug-08-20134,658.8333.8188.42.284,992.29370.842.53Ingles Markets, Incorporated (NasdaqGS:IMKT.A)26.9122.8612.5930.0934.5--1,542.417.52Aug-06-20133,775.1219.5124.80.763,934.71230.752.26Safeway Inc. (NYSE:SWY)25.85241.36,237.65,152.05,693.8-29.011,418.611.73Jul-24-201344,071.52,228.11,114.72.538,007.561,675.321.4The Fresh Market, Inc. (NasdaqGS:TFM)49.0748.22,366.029.046.9--2,395.14.98Aug-28-20131,412.7160.1110.51.431,681.28196.081.71The Kroger Co. (NYSE:KR)37.34518.219,351.27,699.08,891.0-6.027,056.26.53Jun-28-201397,729.04,517.02,847.02.999,451.04,346.042.86Whole Foods Market, Inc. (NasdaqGS:WFM)53.81372.520,044.9(962.0)27.0--19,082.98.17Aug-09-201312,851.81,212.2878.61.4514,372.551,380.11.66Summary StatisticsDay Close Price LatestShares Outstanding LatestMarket Capitalization LatestLTM Net DebtLTM Total Pref. EquityLTM Minority InterestTotal Enterprise Value LatestLTM Tangible Book Value/ShareLTM Filing Date, Income StatementLTM Total RevenueLTM EBITDALTM EBITLTM Diluted EPS Excl. Extra ItemsNTM Revenue (Capital IQ)NTM EBITDA (Capital IQ)NTM EPS (Capital IQ)High70.29518.219,351.27,699.0-29.027,056.221.2-97,729.04,517.02,847.03.6499,451.04,346.044.06Low25.8522.8612.55.1-6.01,542.44.98-1,412.7160.1110.50.761,681.28196.081.4Mean43.09165.86,512.82,400.1-17.58,918.712.53-26,983.41,397.7846.52.2526,497.761,301.222.47Median43.282.24,331.8757.6-17.55,549.912.48-7,456.1630.7440.92.397,956.0679.572.39Displaying 7 Companies.Excel Comp Set ID: IQ245789085All values in millions, except per share data and ratios.Values converted at today's spot rate.Historical Equity Pricing Data supplied by

Key StatsWhole Foods Market, Inc. (NasdaqGS:WFM) > Financials > Key StatsIn Millions of the trading currency, except per share items.Currency:Trading CurrencyConversion:Today's Spot RateOrder:Latest on RightUnits:S&P Capital IQ (Default)Decimals:Capital IQ (Default)Key FinancialsFor the Fiscal Period Ending12 monthsSep-28-2008A12 monthsSep-27-2009A12 monthsSep-26-2010A12 monthsSep-25-2011A12 monthsSep-30-2012ALTM12 monthsJul-07-2013A12 monthsSep-30-2013E12 monthsSep-30-2014E12 monthsSep-30-2015ECurrencyUSDUSDUSDUSDUSDUSDUSDUSDUSDTotal Revenue7,953.98,031.69,005.810,107.811,698.812,851.812,977.914,782.516,969.8Growth Over Prior Year20.7%1.0%12.1%12.2%15.7%15.3%10.93%13.90%14.80%Gross Profit2,706.72,755.13,136.33,536.54,155.84,594.8---Margin %34.0%34.3%34.8%35.0%35.5%35.8%---EBITDA523.5597.1726.0844.21,066.21,212.21,222.61,427.41,696.4Margin %6.6%7.4%8.1%8.4%9.1%9.4%9.4%9.7%10.0%EBIT274.3330.4450.5557.1754.6878.6---Margin %3.4%4.1%5.0%5.5%6.5%6.8%---Earnings from Cont. Ops.114.5146.8245.8342.6465.6542.6---Margin %1.4%1.8%2.7%3.4%4.0%4.2%---Net Income114.5146.8245.8342.6465.6542.6---Margin %1.4%1.8%2.7%3.4%4.0%4.2%---Diluted EPS Excl. Extra Items0.410.420.720.971.261.451.461.732.08Growth Over Prior Year(36.5%)3.3%69.3%34.8%30.6%23.7%15.89%18.16%20.68%Same Store Sales Growth %4.9%(3.1%)7.1%8.5%8.7%NA---All results are taken from the most recently filed statement for each period. When there has been more than one, earlier filings can be viewed on the individual statement pages.Growth rates for the LTM period are calculated against the LTM period ending 12 months before.All forward period figures are consensus mean estimates provided by the brokers and may not be on a comparable basis as financials.Growth rates for forward periods are calculated against prior period estimates or actual pro forma results as disclosed on the Estimates Consensus page.Current Capitalization (Millions of USD)CurrencyUSDShare Price as of Sep-03-2013$53.31Shares Out.372.5Market Capitalization**19,858.7- Cash & Short Term Investments989.0+ Total Debt27.0+ Pref. Equity-+ Total Minority Interest-= Total Enterprise Value (TEV)18,896.7Book Value of Common Equity3,785.0+ Pref. Equity-+ Total Minority Interest-+ Total Debt27.0= Total Capital3,812.0**For companies that have multiple share classes that publicly trade, we are incorporating the different prices to calculate our company level market capitalization. Please click on the value to see the detailed calculation. Prices shown on this page are the close price of the companys primary stock class. Shares shown on this page are total company as-reported share values.Note: Striped area represents the impact of negative Net Liability on Market Cap.Total Liability includes Total Debt, Minority Interest and Pref. Equity.Net Liability includes Total Liability, net of Cash and Short Term Investments.TEV includes Market Cap and Net Liability.Total Capital includes Common Equity and Total Liability.Valuation Multiples based on Current CapitalizationFor the Fiscal Period Ending12 monthsSep-30-2012ALTM12 monthsJul-07-2013A12 monthsSep-30-2013E12 monthsSep-30-2014E12 monthsSep-30-2015ETEV/Total Revenue1.6x1.5x1.5x1.3x1.1xTEV/EBITDA17.5x15.6x15.6x13.4x11.2xTEV/EBIT24.7x21.5x---P/Diluted EPS Before Extra42.3x36.8x36.9x31.2x25.8xP/BV5.2x5.2x---Price/Tang BV6.4x6.5x---

Income StatementWhole Foods Market, Inc. (NasdaqGS:WFM) > Financials > Income StatementIn Millions of the reported currency, except per share items.Template:StandardRestatement:Latest FilingsPeriod Type:AnnualOrder:Latest on RightCurrency:Reported CurrencyConversion:Today's Spot RateUnits:S&P Capital IQ (Default)Decimals:Capital IQ (Default)Income StatementFor the Fiscal Period EndingReclassified12 monthsSep-28-2008Reclassified12 monthsSep-27-2009Reclassified12 monthsSep-26-201012 monthsSep-25-201112 monthsSep-30-2012LTM12 monthsJul-07-2013CurrencyUSDUSDUSDUSDUSDUSDRevenue7,953.98,031.69,005.810,107.811,698.812,851.8Other Revenue------Total Revenue7,953.98,031.69,005.810,107.811,698.812,851.8Cost Of Goods Sold5,247.25,276.55,869.56,571.27,543.18,257.1Gross Profit2,706.72,755.13,136.33,536.54,155.84,594.8Selling General & Admin Exp.2,376.92,375.52,647.82,938.63,354.33,665.3Pre-Opening Costs55.649.238.040.946.950.9R & D Exp.------Depreciation & Amort.------Other Operating Expense/(Income)------Other Operating Exp., Total2,432.42,424.82,685.82,979.43,401.23,716.2Operating Income274.3330.4450.5557.1754.6878.6Interest Expense(36.4)(36.9)(33.0)(3.9)(0.4)(0.4)Interest and Invest. Income6.73.46.98.08.910.9Net Interest Exp.(29.7)(33.4)(26.2)4.18.510.5Other Non-Operating Inc. (Exp.)------EBT Excl. Unusual Items244.6297.0424.3561.2763.2889.2Restructuring Charges(36.5)(31.2)(11.2)(8.3)(9.9)(10.9)Impairment of Goodwill------Asset Writedown(1.5)(14.8)(1.3)(1.2)(1.2)(1.2)Other Unusual Items------EBT Incl. Unusual Items206.5250.9411.8551.7752.0877.0Income Tax Expense92.0104.1165.9209.1286.5334.5Earnings from Cont. Ops.114.5146.8245.8342.6465.6542.6Earnings of Discontinued Ops.------Extraord. Item & Account. Change------Net Income to Company114.5146.8245.8342.6465.6542.6Minority Int. in Earnings------Net Income114.5146.8245.8342.6465.6542.6Pref. Dividends and Other Adj.-28.15.5---NI to Common Incl Extra Items114.5118.8240.4342.6465.6542.6NI to Common Excl. Extra Items114.5118.8240.4342.6465.6542.6Per Share ItemsBasic EPS$0.41$0.42$0.72$0.98$1.28$1.46Basic EPS Excl. Extra Items0.410.420.720.981.281.46Weighted Avg. Basic Shares Out.279.8280.8332.5350.4364.8370.7Diluted EPS$0.41$0.42$0.72$0.97$1.26$1.45Diluted EPS Excl. Extra Items0.410.420.720.971.261.45Weighted Avg. Diluted Shares Out.280.0280.8343.4354.6368.9373.9Normalized Basic EPS$0.55$0.66$0.8$1.0$1.31$1.5Normalized Diluted EPS0.550.660.770.991.291.49Dividends per Share$0.3NANA$0.2$0.28$0.37Payout Ratio %95.2%13.5%3.5%15.4%20.3%23.1%Supplemental ItemsEBITDA523.5597.1726.0844.21,066.21,212.2EBITA287.2338.3456.5563.9761.0885.0EBIT274.3330.4...

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