2-Star Stocks Poised to Plunge: Fresh Market?

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Based on the aggregated intelligence of 180,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, perishable-food retailer The Fresh Market (NAS: TFM) has received a distressing two-star ranking.

With that in mind, let's take a closer look at Fresh Market's business and see what CAPS investors are saying about the stock right now.

Fresh Marketfacts

Headquarters (founded)Greensboro, N.C. (1981)
Market Cap$2.5 billion
IndustryFood retail
Trailing-12-Month Revenue$1.2 billion
ManagementPresident/CEO Craig Carlock (since 2009)
CFO Lisa Klinger (since 2009)
Trailing-12-Month Return on Equity48.9%
Cash/Debt$11.2 million / $39.1 million
CompetitorsKroger
Wal-Mart
Whole Foods Market

Sources: S&P Capital IQ and Motley Fool CAPS.

On CAPS, 47% of the 38 All-Star members who have rated Fresh Market believe the stock will underperform the S&P 500 going forward.

A few months ago, one of those bears, fellow Fool Jacob Roche (TMFTheDoctor), touched on Fresh Market's seemingly unsustainable valuation:

Fast growing, but only by virtue of rapid store expansion, both in number of stores and store size. Actual sales per square foot is lower than even underperformers like SUPERVALU. While one could make the argument that sales/sq. ft. is less relevant because [Fresh Market] has such high margins, I would counter that Whole Foods (more of a competitor than a store like SUPERVALU) has double the sales with the same margin. But [Fresh Market] is priced at least as richly as Whole Foods on a P/E basis, and on PEG basis it's far more expensive than Whole Foods. It'll be very difficult for [Fresh Market] to live up to such lofty expectations.

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The article 2-Star Stocks Poised to Plunge: Fresh Market? originally appeared on Fool.com.

Fool contributor Brian Pacampara owns no position in any of the companies mentioned. Motley Fool newsletter services have recommended buying shares of Fresh Market and Whole Foods, as well as creating a diagonal call position in Wal-Mart. Motley Fool newsletter services have also recommended buying calls on SUPERVALU. The Fool owns shares of Whole Foods and SUPERVALU. Try any of our Foolish newsletter services free for 30 days.We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool's disclosure policy always gets a perfect score.

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