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Whole Foods Financial Recommendation - Research Paper Example

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College
Research Paper
Finance & Accounting
Pages 4 (1004 words)

Summary

Whole foods is a giant retailer in the food industry with sales volume reaching several billion dollars. Its earnings have been growth oriented in the past couple of years. It dipped after 2006 when its operating profit margin dropped from 5.69% to 4.51% and saw a further decrease to 2.97% in 2008…

Extract of sample
Whole Foods Financial Recommendation

However, since then whole foods have been on the rise by achieving a margin of 4.9% by the end of 2010. Net profit margins have shown a similar trend as well as operating profits. In 2006, the industry performed well and recorded 3.63% of net profit margin. However, since then it dropped significantly and reached a low point in 2008 where it recorded a net profit margin of only 1.43%. Whole foods has since then performed well to reach up to 2.7% in 2010. All profitability ratios show a similar trend with a downward moving slope till 2008 and a positive flow from there on. Return on equity is a measure of profitability for contributors of equity capital. ROE helps in determining the firm’s rate of growth of earnings (Besley and Brigham, 2000). Basically, ROE can be computed by dividing the net income by the shareholders equity. ROE dropped from 13.5% in 2006 to 7.6% in 2008. From there on, Whole foods issues preferred stock to invest in the business to recover from the dull patch. ROE for 2009 was 9.77% and it further grew to 10.12% in 2010. Like other profitability indicators, earning per share has been consistent throughout. The year 2006, being a highly profitable for the investors, showed EPS of $1.46. It dipped all the way to $0.82 in 2008 and then it steadily grew to record $1.45 EPS in 2010. ...
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