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

Spoiled for Choice with Natural Grocers

Valuation concerns aside, I was quite impressed with the company's fourth-quarter and full-year results. With revenue and same-store sales advancing 28% and 11%, respectively, Natural Grocers has proven worthy of the Street's optimism. And with management's consistent approach to disciplined cost controls, leading to a robust 60% jump in fourth-quarter profits, you can see how easy it is to fall in love with this business.

At the same time, I refuse to ignore that both Whole Foods and Fresh Market have already blazed the same trail. Today, their numbers are not as gaudy and their valuations and stocks have come down to more reasonable levels relative to where they were. Nevertheless, that hasn't changed my cautiousness (cautiousness, not bearishness). Given that they no longer corner the natural and organic market, they will face challenges in the future.

In that regard, these same sorts of competitive risks would be heightened for Natural Foods, given that it's a much smaller company relative to Fresh Market and Whole Foods. And I believe that pressure from Wal-Mart and Kroger, which have much better leverage, can apply the sort of squeeze to Natural Grocers that Whole Foods and Fresh Market may not immediately feel. Then there's the likes of Sprout (SFM), which has organic ambitions of its own.

I do believe, though, that Natural Grocers does have a slight edge in terms of organic ratings. The fact that the company products are guaranteed to contain no artificial preservatives, flavors, colors or sweeteners is a meaningful advantage over Whole Foods and Fresh Market. Natural Grocers also has a strong pricing strategy that sets it apart from its peers.

Nevertheless, as beneficial as the pricing advantage might be to consumers, this isn't enough to make this stock a buy for investors. Until Street estimates come down, I believe it will be harder for Natural Grocers to reach those expectations, given the increased competition in the organic and natural arena.

At the time of publication, the author held no position in any of the stocks mentioned.

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 17,265.99 +109.14 0.64%
S&P 500 2,011.36 +9.79 0.49%
NASDAQ 4,593.4250 +31.2360 0.68%

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