Is Fresh Market (Nasdaq:TFM) Weak Value Stock?

Tuesday, 20 May 2014 : The price of Fresh Market Inc (Nasdaq : TFM), small-cap consumer non-durables value stock dripped -$1.19 (or -3.83%) to $29.91 in intraday trading post vacillating among $29.35 and $31.37.

Recently, Fresh Market Inc expects Q1 2014 adjusted earnings of $0.41 to $0.44 per diluted share. Organization expects FY 2014 diluted earnings per share of $1.30 to $1.43 and adjusted earnings of $1.56 to $1.66 per diluted share. Organization expects FY 2014 comparable store sales growth of 1.5pct to 3.5pct and Q1 2014 EPS of $0.50 and FY 2014 EPS of $1.67 .

TFM stock is worth nearly $1.51 billion market capitalization and $1.54 billion enterprise value. Fresh Market, Inc., is a specialty retailer focused on creating an extraordinary food shopping experience for its customers. The Company provides fresh, carefully selected, high-quality food products focused on perishable categories.

Valuation

Fresh Market Inc is currently trading at a price-to-earnings (P/E) multiple of 29.61x, which is a premium to the industry benchmark multiple of 21.39x. The stock is currently trading at a forward price-to-earnings (P/E) multiple of 19.75 with 17.75%% earnings growth rate. The stock with 1.11 PEG Ratio is considerably overvalued. The prospective company should have a low Price/Sales ratio. Fresh Market Inc noted 1.00% ratio in the past 12 months, which is worse to the peers 0.70%. TFM is growing earnings at 9.81% in last 5 years and has price to earnings ratio 29.61 below 40.

Review of Latest Financial Results

Fresh Market Inc noted sales for the quarter ending Jan-14 of $425.81 million worse than the analyst estimate of $428.62 million with difference of $2.81 million, beaten sales by 0.66%. Company noted $0.39 earnings (per share) adverse than the analyst estimate of $0.42 with difference of $0.03, beaten earnings by 7.80% for the quarter ending Jan-14. In most recent quarter, Fresh Market Inc’s sales performance has moved up than the industry index. The company’s sales growth is 15.13%, whereas benchmark is 13.19% over the comparable period. chipper companies demonstrate both revenue and net income growth of at least 25% as compared to the prior year. These rates for TFM (-90.38% for EPS, and 15.13% for Sales) are not good enough to pass. Company’s earnings per share (EPS) growth slumped by -90.38% for the recent quarter over quarter, whereas industry average is 21.02%.

Financials

Company declared 19.81% debt to equity ratio, which is a discount to the peers 79.20%. Fresh Market Inc’s Price/Book ratio is 5.86%, which is a premium to the industry average 2.67%. Fresh Market Inc’s return on assets (ROA) is 11.88%, which is a premium to the industry benchmark of 4.68% in managing assets producing more profits throughout the year. Company’s 14.24% price/cash flow ratio is more valuable than the industry average of 9.93%. Company’s current ratio noted to 0.79%, lower for typically financially secure and defensive investors, is a worse to the peers 1.08%. TFM’s return on investments (ROI) is 15.53%, which is a premium to the industry benchmark of 7.65% evaluating the efficiency of an investment over cost.

Shareholder Returns

With 3.36% profit margin, Fresh Market Inc has weak position within respective industry (3.53%) to sustain and offer higher shareholder returns. Fresh Market Inc noted 0.00% payout ratio in the past 12 months, which is to the peers 0.00%. A good indicator that a company has the ability to raise its dividend is a low payout ratio. Company’s return on equity (ROE) is 22.38%, which is a premium to the industry benchmark 11.65%.

Stock Performance

Fresh Market Inc has over performed its peers quite significantly over the past few months. The company’s one-month performance has been the astonishment -12.95%, compared to the Whole Foods Market’s -22.20% and Kroger’s 6.02%. S&P 500’s has noted jolt 1.44% returns during the same time frame. Wall Street analysts keep an eye open for stock that are trading ($29.91) within 15% of 52-week highs ($57.17), as it is likely to continue in its upward trend. The 52-week low noted to $29.35. Stock’s 52-Week change (-35.94%) in comparison to the S&P500 (12.94%) shows relatively downward trend.

Conclusion

Fresh Market Inc, speculative growth small growth grocery stores stock flashes high liquidity, debt control, long term EPS growth, respectable R&D budgets, sales multiple not overpriced or risky and significant profit margin. Investors who want to own conservatively financed, well-growing companies that have been overlooked—hopefully temporarily—by the rest of Wall Street should invest in TFM. Fresh Market Inc, Grocery Stores player, to underperform the market over the next six months with above average risk. TFM is currently ranked at 169 / 265 (Bottom 36%) in industry. We recommend investors to ‘Hold’ the stock.

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