Dueling Fools: Whole Foods Bull Rebuttal

"From today's price, Wall Street expects that those adjusted free cash flows will grow at 20% per year for the next five years, and 15% for the following five years."
-- David Meier, five minutes ago

Dave's right; average companies don't attain 15% or better cash flow growth over the course of a decade. Only exceptional firms do that. Retailers like, say, Starbucks (Nasdaq: SBUX  ) and Wal-Mart (Nasdaq: WMT  ) :

Cash from operations

2006

1996

10-year CAGR

Starbucks

$1,132 mil

$136 mil

23.6%

Wal-Mart

$20,164 mil

$2,383 mil

23.8%

Source: Capital IQ, a division of Standard & Poor's.

Now, here's a reminder of why Whole Foods (Nasdaq: WFMI  ) is an exceptional firm in its chosen market:

Metric

Kroger

Safeway

SUPERVALU

Whole Foods

EBITDA growth

6.1%

0.7%

21.5%

20.3%

Source: Capital IQ.

Remember, I didn't say that this stock is cheap. It isn't. But, again, it doesn't have to be. Investors throughout history have made billions buying into leaders in explosive industries whose stocks, while not cheap, were offering growth at a reasonable price. That's what we have with Whole Foods. Ready to eat yet?

You're not done with this Duel yet! Go back and read the other arguments, then vote for the winner!

Whole Foods and Starbucks are Stock Advisor picks. To discover Tom and David Gardner's entire portfolio of superior stocks -- currently beating the market by more than 39 percentage points -- try a free 30-day subscription.

Fool contributor Tim Beyers, ranked 1,272 out of more than 25,000 in our Motley Fool CAPS investor-intelligence database, wonders when Taco Bell will go organic. Hey, if junk food works for Warren Buffett.... Tim didn't own shares in any of the companies mentioned in this story at the time of publication. All of Tim's portfolio holdings can be found at his Fool profile. His thoughts on Foolishness and investing may be found in his blog. Wal-Mart is an Inside Value recommendation. The Motley Fool's disclosure policy prefers muesli to granola and Birkenstocks to Crocs.


Read/Post Comments (0) | Recommend This Article (15)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 524744, ~/Articles/ArticleHandler.aspx, 9/21/2014 4:17:52 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement