The two companies couldn't be more different, but that's what makes the comparison so interesting.
Out of 24 analysts, average 2015 consensus estimate is $1.67. I hate looking at consenus estimates, I'm typically drawn to the lowest estimate as a measure of dispersion. The lowest 2015 estimate is $1.63, and the lowest forward estimate is $1.45. Using forward estimates, the stock isn't exactly cheap at almost 20x next year's lowest earnings estimate. Still, $1.45 works out to $500M in profit on sales of about $15B, good for a net margin of 3 1/3% (What do you want! They sell groceries!)
$1.45 / $1.63 - 1 = -11% in eps yr/yr.
I recall a tidbit from reading The Intelligent Investor whereby Ben Graham modelled out different P/E's for different growth scenarios. The no growth scenario deserved a P/E between 8x and 13x (if I recall correctly).
At 13 x $1.45, this would suggest that Whole Foods compress to around $19. Not much of a stretch if the powers of sentiment work their magic.
Facebook on the other hand, reported a whopping profit of $.57 per share (ex-items like stock based comp and other non-significant non-operating costs). GAAP eps were $.31 per share. The stock is at all time lifetime highs AH's, up close to 4%.
Get this, there are 50 analysts folllowing Facebook (surely this is a good thing). Consensus estimates for 2015 are $2.07, and $2.74 for 2016. Low estimates are $1.97 in 2015 and $2.21 in 2016. The dispersion between low and consensus for 2016 is pretty significant, but then again, what do I know (not much).
And the P/E...drumroll please...52x consensus 2015, 54x low 2015, 40x consensus 2016, and 48x low 2016.
The comparative metrics are just hillarious.
Facebook on equal revenue has a market cap 26x that of Whole Foods. Expectations are pretty lofty in regards to future growth. I'm not going to go over the remaining valuation metrics as they all tell the same story. Lofty expectations baked into one, depressed sentiment baked into another. Which one wins over time?
A brief history of Whole Foods: way way way back in 2005, Whole Foods was a momentum darling. Wall Street couldn't get enough (neither could Cramer). Investors paid close to 60x ttm earnings in 2005 in the hopes that the organic food pricing model was perpetually sustainable.
I managed to dig up the following gem on valuing Whole Foods at pretty close to it's peak price, doing a simple google search: "Whole Foods 2005 Cramer". Apparently, this gentleman was a best-selling author at one point (maybe he still is, unlike me, who's just a schmuck running a blog).
I'm going to copy and paste the entire article circa 2005 (copyright Phil Town):
FEBRUARY 04, 2005Yes, this was seriously written back in 2005. So what actually happened between 2005 and today? The exact opposite. Instead of multiple expansion from an already lofty 60x ttm 2004 earnings, the multiple has compressed over the last decade. And guess what, it's still compressing.
If anyone has the chance, I avidly follow a gentleman on gurufocus writing under the pseudonym "The Science of Hittting". A few months ago, he had a great article on Whole Foods, which I'm going to reproduce below. The post was originally written back in August of this year and speaks to exactly the type of euphoric sentiment prevalent in Mr. Town's forthy article above. Link here: