Along with the country’s growing interest in eating healthier comes an ever-increasing appetite for organic food. Sales in this segment have grown by double digits every year since 1990 (from $3.6 billion in 1997 to $43.3 billion in 2015), and the segment’s consolidation continues with the recent announcement that French company Danone will purchase WhiteWave Foods (maker of Earthbound Farm salad greens and Horizon Organic dairy products) for $10 billion.
In a recent article for TheStreet.com, John Reese, CEO of Validea, discusses this trend and identifies the following appealing stock picks:
- Hain Celestial Group Inc. (HAIN) manufactures, markets, distributes and sells organic and natural products in the U.S., U.K., Canada and Europe. Our Peter Lynch stock screen favors its price-to-earnings-to-growth (P/E/G) ratio of 0.76 and earnings-per-share of 34.6%, and our Martin Zweig screen likes the price-to-earnings ratio of 26.15 and 40.48% revenue growth.
- Mondelez International Inc. (MDLZ) manufactures and markets snack food and beverage products for consumers in approximately 165 countries around the world. Under Validea’s Momentum stock screen, MDLZ well exceeds both quarterly EPS and annual earnings growth requirements by a huge margin, and our Lynch model finds MDLZ’s P/E/G ratio of 0.17 to be excellent.
- Sprouts Farmers Market Inc. (SFM) is a food retailer that offers natural and organic foods including produce, bulk foods, meat and seafood, bakery, dairy, and frozen foods. Under our Kenneth Fisher investment model, SFM gets high marks for its modest price-to-sales ratio of 0.96, and our James O’Shaughnessy screen likes SFM’s consistent earnings growth.
- Hormel Foods Corp (HRL) is a multinational manufacturer and marketer of foods and meat products that purchased organic meats company Applegate Farms in May 2015 for $775 million. Our Warren Buffett investment methodology likes HRL’s earnings predictability and growth as well as its low leverage, and our Benjamin Graham model favors HRL’s hefty sales ($9.2 billion) and low level of long-term debt ($250 million) compared to net current assets of $1.0 billion.