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Is It Time to Catch the Natural Foods Wave?

April 09, 2014 | About:

WhiteWave Foods (NYSE:WWAV) closed today at $26.75. At the current price it is approximately 12% below the recent high of $30.46 set in early March. At current levels the stock sells at 29 times 2014 and 25 times 2015 EPS estimates. The company was spun off from Dean Foods (DF) at the end of 2012.

WhiteWave manufactures, markets, distributes and sells natural foods and beverages, coffee creamers and beverages, and dairy products throughout North America and Europe. The company’s brands distributed in North America include Silk plant-based foods and beverages, International Delight and Land O'Lakes coffee creamers and beverages, and Horizon Organic dairy products. The company entered the packaged salads market in January with its purchase of Earthbound Farms.

WhiteWave released earnings on February 13, reporting $0.22 earnings per share (EPS) for the quarter, beating the consensus estimate of $0.20 by $0.02. The company had revenue of $679.0 million for the quarter, compared to the consensus estimate of $663.84 million. Quarterly revenue was up 11.5% on a year-over-year basis. Earnings grew at a 23% clip for fiscal 2013.

While all segments of operations seem to be solid revenue producers, it's the rise of almond milk that is driving WhiteWave’s impressive growth numbers. From 2009 to 2012, compounded annual growth in almond milk sales were 126%, rising to $458 million in sales.

At a market cap of $4.7 billion, WhiteWave is a relatively small company in an industry of giants. The primary risk is that competitors use their size and resources to out-maneuver WhiteWave, thus cutting into the company’s growth. They also have exposure to pricing and supply risk on their commodity inputs.

Given their current valuation, I am keeping a close eye on WWAV, looking for an opportunity to add to my modest position at lower prices. Given management’s success and the company’s performance to this point, I see WhiteWave as an attractive takeover target for one of the larger companies in the business.

About the author:

Open to opportunities in equity analysis or fund management in DFW - 11 years of experience managing funds for clients...I do a mix of value and growth investing...it is my intent to diversify investment styles to a degree as well as individual stocks.

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GuruFocus has detected 4 Warning Signs with The WhiteWave Foods Co $WWAV.
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