High Tide

WhiteWave Foods (WWAV) was one of the hottest stocks last year and has continued its hot streak into 2015.

WhiteWave is a diversified food company, with many brands focusing on healthy or organic. That’s big because organic is where the growth is (and many food stocks don’t have any growth right now). Thus WhiteWave is considered a takeover target, as a big food conglomerate can acquire WWAV and get instant growth.

Right now WWAV is the one doing the acquiring. In 2014 WhiteWave acquired Earthbound Farm in 2014 for $600 million, then added So Delicious for $200 million. This year it bought Wallacy Yogurt for $125 million and Vega, which makes nutritional powders and bars, for $550 million. These two new buys should add maybe 10 cents or more to 2016 EPS.

 Here’s 2015 Q2 sales and year-over-year growth:

1. America’s Food & Beverages +15% to $640 million, and includes the following segments
   International Delight & Land O Lakes creamers:  +6%
   Silk soy & almond milk & beverages: +26%
   Horizon Organic milk & dairy: +15%
2. America’s Fresh Food (Earthbound Farm organic produce) -1% to $151 million
3. European Foods & Beverages (Alpro) +23% to $133 million

Also, the company has a 50/50 joint venture with Mengniu Dairy in China to launch premium plant-based products to the world’s largest consumer group by the end of this year. For a food manufacturer, WWAV is growing fast. That’s a good thing. What’s not good is the stock price.

One Year Chart

WWAV has an estimated long-term growth rate of 20%. So it should have a P/E of maybe 20 or somewhat more than that. When I profiled the stock last year at $36 the P/E was 36 — too high. Now WWAV is $47 and the P/E has risen to 41 — still too high.

This month the Dow dropped 1500 points in three days, then rebounded. But even through the downdraft the stock only got down to $44, and that was during a flash crash when the Dow dropped 1000 points on Monday before rebounding.

Fair Value

I feel WWAV is organically worth 30x earnings. That puts the Fair Value at $35. When I did these charts yesterday the stock was $47.

Sharek’s Take

Like many stocks on my radar, WhiteWave Foods is too-high to buy. The story is fun, with all these growing companies joining forces to save humanity by putting good things in our stomachs. But in the end its a food manufacturer, and those rarely carry high P/E ratios because the growth rates aren’t that high. WWAV’s estimated growth rate is 20% per year, yet it sports a P/E of 41. Still, I like the stock and would like to buy in, at the right price. Today that price I’m willing to pay is $35.