Whole Foods Market, Inc. (WFM): Too Expensive?

With over 2,400 stores, The Kroger Co. (NYSE:KR) is one of the largest U.S. supermarket chains, and trades at a seemingly very cheap valuation of just 12.4 times TTM earnings. Appearances can be deceiving however, as Kroger isn’t growing nearly as fast as Whole Foods Market, Inc. (NASDAQ:WFM) and the company’s balance sheet is not nearly as attractive with almost $6 billion in debt and just over $200 million in cash.

The largest retailer of any kind in the world, Wal-Mart Stores, Inc. (NYSE:WMT) is actually the largest supermarket operator in the United States with about $180 billion in annual sales (for comparison, The Kroger Co. (NYSE:KR)’s annual sales are about $97 billion). They are also quite possibly the most attractive as an investment, trading at just 15.8 times earnings with a 9% forward growth rate expected. Additionally, Wal-Mart pays a 2.4% dividend which has been raised very consistently. They also have a great track record of being a recession-proof company, actually gaining revenues each and every year during the recent financial crisis. Wal-Mart Stores, Inc. (NYSE:WMT) is one of only a handful of companies in the entire market that actually grew its sales every year between 2008 and 2011.

Conclusion

If you want a stable, predictable investment that will provide you with good returns on a consistent basis, buy Wal-Mart. If, on the other hand, you have a bit more appetite for risk and are willing to deal with a little more volatility, Whole Foods Market, Inc. (NASDAQ:WFM) may be the way to go. However, at the current levels it may be just a bit too expensive. I would wait for a significant pullback before jumping in, but this is definitely one growth story to keep an eye on.

The article Healthier Lifestyle Trends Will Boost This Grocer originally appeared on Fool.com and is written by Matthew Frankel.

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