Absolutely...

Interesting saying that WFMI will go the way of Cisco. What do you attribute that to? In other words, are you looking at the stock price and basing your opinion on that, or are there other factors that you could touch upon that provides a clear picture of a Cisco-like drop? I would be interested in hearing your analysis. Although I consider myself a long, I am not wedded to this, or any stock. Thanks in advance for your reasonings.

Kat

A lot of people refer to Whole Foods as a grocery stock while not understanding that it shouldn't be thought of as just another grocery stock any more than its consumers think of it as just another grocery store. A lot of predictions of doom have come and gone without any basis that I could discern other than that misperception.
People were paying $80 bucks a share for Cisco because they thought that the entire economy was being replaced with on on the internet. They just assumed that while all the other players were battling it out for share, Cisco was going to keep raking in the cash building the entire infrastructure from the ground up. The stock crashed when the fundamental underlying assumption didn't pan out and overnight it wasn't the sure-fire bet on the house.
Whole Foods, on the other hand has just kept demonstrating that they accomplish everything they say they will. They make profits, they expand, the profits expand, they make the supply arrangements that they can leverage with their larger market share, and expand some more. Looking at the big picture, I just don't see the flash in the pan. I'm no financial wizard, so please, by all means, tell me what I'm missing.

http://finance.yahoo.com/q/bc?t=my&s=CSC...

http://finance.yahoo.com/q/bc?s=CSCO&t=2...

Whole Foods was once a $4.25 stock 13 years ago. Now it is a $94 stock. Let me do the math for you: the stock has increased over 2,200% in 13 years--a 26.89% CAGR. Do you realize that for 13 years now people have been complaining about the stock being overpriced? During those 13 years the stock price increased at a 26.89% CAGR. Why? Because sales increased at a 33.52% CAGR and net profits increased at a 40.82% CAGR during that same 13 year time period. The simple fact is that Whole Foods has grown sales and earnings faster than its stock price has grown over the last 13 years. The stock has always traded at a high PE multiple because of its rapid growth and people (especially the shorts) have always bitched about it.

Guess what? Whole Foods is going to continue to trade at a high PE multiple so long as it continues to rapidly grow. Get over it! 13 years from now Whole Foods will be a $800+ stock before splits (18% CAGR) because the company is going to keep on strongly growing for another 10+ years. Whole Foods is a tremendous growth stock and over the long-term that growth is going to continue to make all but the luckiest market timing shorts lose alot of money, just as they have lost a ton of money over the last 13 years.

Whole Foods is not a cyclical business nor is it a tech stock. Whole Foods is a food retailer and as a food retailer it has very predictable cash flows that don't vary very much from month to month or year to year. Only labor unions going out on strike can radically harm a food retailer's cash flow and Whole Foods doesn't have any unions.

What therefore does the future hold for this company? Many more successful stores resulting in much higher cash flows. Higher cash flows results in higher stock prices. That is what the future holds for Whole Foods. Wait and see.

So, what is your take in % regarding strong growth? EPS, NET INCOME if you do not mind.

Well the future is indeterminate of course despite my prowess with a calculator, so there is no way to know for sure. Unexpected events are always possible from terrorist attacks to new competitors to serious Whole Foods mistakes. I believe, however, that EPS growth will be roughly equivalent to sales growth over the next 10 years and net income growth will be slightly higher. Whole Foods will probably get marginal operating leverage over time due to scale, but this will be largely offset by additional competition. I'm therefore projecting 18% CAGR in sales and EPS and 20% CAGR in net income over the next 10 years. I project the stock price grow at approximately the same rate as the EPS 18% CAGR and maybe a little less if the PE multiple contracts.

Yeah, it's always different this time...