This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

Whole Foods Finally Has a Real Competitor

Stocks in this article: WFMNGVC

The five-year chart below is instructive for what's going on with WFM and the market it competes in. We can clearly see that the share price has moved in lock-step with the trailing 12-month revenue-per-share growth. WFM Chart WFM data by YCharts

Natural Grocers, which sells only food that doesn't contain artificial ingredients such as colors, sweeteners, flavors, preservatives, hydrogenated oils or produce grown with synthetic pesticides, is growing steadily. NGVC is capitalizing on the growing awareness of the benefits of eating natural and organic foods. It's expanded into 13 states with over 65 stores.


When it comes to the claim of only selling all-natural or organic foods, WFM can't quite make the same assertion. That advantage, plus NGVC's continuing execution of its growth expansion, speaks to the stock's forward PE ratio being slightly above 36.

The chart below gives us a better view of NGVC's share price since it went public in July 2012. Not a bad start for being public less than a year. It will report its most recent earnings April 30. NGVC Chart NGVC data by YCharts

The one-year price target consensus by analysts' estimates for NGVC is around $25. It closed April 5 at $22.05 and has a market cap of nearly $494 million. Another factor that makes Natural Grocers a vigorous competitor for WFM is that, on average, NGVC's prices are lower.

From my research, I've found that prices range 7% to 10% lower at Natural Grocers than at Whole Foods. NGVC keeps the overhead and costs lower per store and then passes those savings along to its satisfied customers. That's doable when one considers that WFM stores usually have four times more square footage per store and that requires more employees per store and higher energy costs.

I'm beginning to wonder if the best way for WFM to deal with this pesky, persistent competitor -- which also happens to be debt-free, thanks to its successful IPO last July -- is to acquire the company. The longer WFM waits, the higher NGVC's price will climb.

It appears NGVC has the upper hand when it goes head-to-head with WFM in a local area. WFM has more variety and is better known. But can it beat NGVC's service, prices and personal touches? With a projected earnings growth rate of 30% per year or higher, its stock may have some good upside potential from here as well.

As the company promises, "Natural Grocers' popularity and success can be traced back to its founding principles -- providing customers high-quality products at everyday affordable prices. Today, Natural Grocers also offers in-store nutritional support programs, free public health & wellness seminars and free access to nutritional health coaches."

I know for a fact that our locally owned natural-food store is sweating about this new competitor, and I can't help but believe that WFM is feeling the same way. Keep your eyes on WFM and NGVC because the competition is just beginning to heat up.

Disclosure: As of the time of publication, the author wasn't long any of companies mentioned in this article.

This article was written by an independent contributor, separate from TheStreet's regular news coverage.

2 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 16,756.61 +295.29 1.79%
S&P 500 1,961.61 +34.50 1.79%
NASDAQ 4,474.4320 +91.5850 2.09%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs