Ruddick Eats Competitors for Lunch

Ruddick(RDK) is an unlikely marriage that is successful.

The holding company has two unrelated businesses: a global thread and yarn company and a regional supermarket chain. TheStreet.com Ratings gives Ruddick a "buy" and expects the stock to outperform competitors Winn-Dixie Stores(WINN), Ingles Markets(IMKTA), SafeWay(SWY) and Weis Markets(WMK) because it's fundamentally better.

Harris Teeter is Ruddick's supermarket chain, operating in eight Southern states and the District of Columbia. The store sells a range of grocery items, personal products and prescription drugs through its pharmacies. The chain is known for cleanliness and competitive pricing. Harris Teeter accounted for 92% of RDK's fiscal 2008 revenue.

American & Effird, the other subsidiary, is a manufacturer of industrial sewing thread and embroidery. The company has an extensive global presence, with wholly owned units spread across the world, from Canada to China to Colombia.

Ruddick has posted consistent EPS growth since the beginning of fiscal 2006. In the latest quarter, EPS improved 15.9% from the fourth quarter of fiscal 2007, while net sales rose 8.79%. Winn-Dixie Stores and Weis Markets posted year-over-year declines in quarterly EPS.

Ruddick's quarterly return on assets increased to 5.7% from 5.27%, and return on equity jumped to 11.74% from 10.95%. The company has a modest amount of debt, as reflected by a debt-to-capital-ratio of 0.29. It has weak liquidity, seen in its quick ratio of 0.32.

Using the Food and Staples Retailing Index as a comparison, RDK is a bargain stock. The shares are trading at a discount based on price to book, price to cash flow, price to earnings and price to sales. The stock declined 25.18% last year and is trading near the bottom of its 52-week range of $23.82 to $39.79. RDK has an annual dividend yield of 1.81%.