Are You Catching a Falling Knife with Whole Foods?

Whole Foods (WFMI) shares were crushed in yesterday’s trading, finishing down 14% after a disappointing first-quarter earnings report which showed same store sales slowing and overall growth slowing.

That is the kiss of death for a “growth” stock- which Whole Foods used to be. From Marketwatch:

For its fiscal year 2008, which ends in September, Whole Foods backed its comparable-store sales forecast calling for growth between 7.5% and 9.5%.

“We believe management’s reiteration of same store sales guidance is highly optimistic,” wrote Bear Stearns analyst Robert Summers, who rates the stock underperform, the equivalent of a sell. “This stock, in our opinion, remains well on the path to becoming a value stock and encourage investors not to catch a falling knife.”

Whole Foods is trading at new 52 week lows. It might even be multi-year lows.

Is it really “catching a falling knife”?

I’m a value investor, at heart, so the comment by the analyst that the stock is on the way to becoming a value stock warms my little heart.

But it doesn’t seem cheap enough right now. It is still trading around 20 times earnings.

Normal valuations for determining a “value” stock are for earnings to be under 15x. Whole Foods is still too expensive for my blood.

I know many of you are extremely loyal to the brand. It’s not going anywhere. But in this market environment and economy- it will likely go much cheaper.

Seems like a falling knife scenario to me. Don’t buy it on the way down.

Good things come to those who wait.

[This author is a former Whole Foods shareholder and would gladly be so again- for the “right” price.]