Head to Head Review: Whole Foods Market (WFM) and Wal-Mart Stores (WMT)

Whole Foods Market (NASDAQ: WFM) and Wal-Mart Stores (NYSE:WMT) are both large-cap retail/wholesale companies, but which is the better investment? We will compare the two businesses based on the strength of their risk, profitability, dividends, analyst recommendations, earnings, institutional ownership and valuation.

Analyst Ratings

This is a summary of current ratings and target prices for Whole Foods Market and Wal-Mart Stores, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Whole Foods Market 3 17 3 0 2.00
Wal-Mart Stores 2 17 14 0 2.36

Whole Foods Market presently has a consensus price target of $37.39, indicating a potential downside of 10.53%. Wal-Mart Stores has a consensus price target of $80.13, indicating a potential downside of 0.79%. Given Wal-Mart Stores’ stronger consensus rating and higher probable upside, analysts plainly believe Wal-Mart Stores is more favorable than Whole Foods Market.

Insider and Institutional Ownership

86.3% of Whole Foods Market shares are owned by institutional investors. Comparatively, 30.0% of Wal-Mart Stores shares are owned by institutional investors. 1.3% of Whole Foods Market shares are owned by company insiders. Comparatively, 51.4% of Wal-Mart Stores shares are owned by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock is poised for long-term growth.

Profitability

This table compares Whole Foods Market and Wal-Mart Stores’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Whole Foods Market 2.44% 13.26% 6.84%
Wal-Mart Stores 2.79% 16.96% 6.68%

Valuation & Earnings

This table compares Whole Foods Market and Wal-Mart Stores’ top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Whole Foods Market $15.88 billion 0.84 $1.32 billion $1.22 34.25
Wal-Mart Stores $487.51 billion 0.50 $32.97 billion $4.41 18.32

Wal-Mart Stores has higher revenue and earnings than Whole Foods Market. Wal-Mart Stores is trading at a lower price-to-earnings ratio than Whole Foods Market, indicating that it is currently the more affordable of the two stocks.

Dividends

Whole Foods Market pays an annual dividend of $0.72 per share and has a dividend yield of 1.7%. Wal-Mart Stores pays an annual dividend of $2.04 per share and has a dividend yield of 2.5%. Whole Foods Market pays out 59.0% of its earnings in the form of a dividend. Wal-Mart Stores pays out 46.3% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Wal-Mart Stores has raised its dividend for 42 consecutive years. Wal-Mart Stores is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Risk & Volatility

Whole Foods Market has a beta of 0.82, indicating that its share price is 18% less volatile than the S&P 500. Comparatively, Wal-Mart Stores has a beta of 0.29, indicating that its share price is 71% less volatile than the S&P 500.

Summary

Wal-Mart Stores beats Whole Foods Market on 12 of the 17 factors compared between the two stocks.

Whole Foods Market Company Profile

Whole Foods Market, Inc. is engaged in the business of natural and organic foods supermarket. The Company operates approximately 456 stores in the United States, Canada and the United Kingdom. Its stores have an average size of approximately 39,000 square feet, and are supported by its distribution centers, bake house facilities, commissary kitchens, seafood-processing facilities, a produce procurement center, and a specialty coffee and tea procurement and roasting operation, among others. It offers over 30,000 organic stock keeping units (SKUs), covering various areas of its store, including produce, packaged goods, bulk, frozen, dairy, meat, bakery, prepared foods, coffee, tea, beer, wine, cheese, nutritional supplements, vitamins, body care, pet foods and household goods. The Company’s brands include 365 Everyday Value, Allegro Coffee, Whole Foods Market, Whole Paws, and Engine 2 Plant-Strong. It also offers approximately 400 temporary exclusives.

Wal-Mart Stores Company Profile

Wal-Mart Stores, Inc. is engaged in the operation of retail, wholesale and other units in various formats around the world. The Company operates through three segments: Walmart U.S., Walmart International and Sam’s Club. The Walmart U.S. segment includes its mass merchant concept in the United States operating under the Walmart or Wal-Mart brands, as well as digital retail. The Walmart International segment consists of the Company’s operations outside of the United States, including various retail Websites. The Walmart International segment includes various formats divided into three categories: retail, wholesale and other. These categories consist of various formats, including supercenters, supermarkets, and warehouse clubs, such as Sam’s Clubs, cash and carry, home improvement, specialty electronics, apparel stores, drug stores and convenience stores, as well as digital retail. The Sam’s Club segment includes the warehouse membership clubs in the United States, and samsclub.com.

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