Case7_SampleWriteup_Demo - Individual Case#1 Analysis Whole Foods Market The Deutsche Bank Report Sample Student Executive Summary This report was

Case7_SampleWriteup_Demo - Individual Case#1 Analysis...

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Individual Case #1 Analysis Whole Foods Market: The Deutsche Bank Report Sample Student Executive Summary This report was prepared on May 8, 2014 for Ms. Karen Short in helping her make a decision about whether to change her target price recommendation for Whole Foods Market. Two days ago, on May 6, 2014, Whole Foods Market missed their expected EPS by $0.03 per share, and the company experienced a 19% drop in share price to $38.93 per share. Deutsche Bank’s previous recommendation from analyst Karen Short in April was a “buy” recommendation at a $60 per share estimated value. Ms. Short, along with the rest of our team, must decide whether to alter this recommendation given the recent drop in share price. Whole Foods Market faces several challenges from a changing industry dynamic that may make it difficult to maintain the high levels of growth and operating margins necessary to justify the stock price premium. The grocery market is only increasing at a rate of 2-3% per year, while Whole Foods and other natural and organic grocery stores have had 20% growth for the past two decades. This rate of increase will likely be difficult to sustain long-term. In addition, many conventional grocery stores and other large stores that sell food (Wal-Mart, Target, Costco) have all been increasing their organic food selection. These stores typically don’t have the high prices associated with Whole Foods Market. To stay competitive, Whole Foods may need to lower their prices which will impact margins. They are also facing fewer locations to open stores in high income and education areas. To maintain their strategy of store growth, they might also be pressured to lower prices. The analysis conducted in this report included an enterprise value ratio analysis, the calculation of WACC, analysis of the FCF of Whole Foods, and determining the key drivers of the ROC. The EBITDA margin and EV/EBITDA multiple of Whole Foods and other natural and