White Wave Sailing Strong Into Earnings. Should You Buy?

After being spun off from its parent company, Dean Foods (NYSE: DF  ) , health-oriented food purveyor White Wave Foods (NYSE: WWAV  ) offered the market a nearly pure play on plant-based food items, one of the fastest growing areas within the industry. The spinoff was originally priced rather high, though the company is certainly growing. Now, the secondary offering is coming to a close and the spinoff is nearly complete while the company posts strong preliminary results. Even at its premium price, is White Wave Foods a buy after the spin-off is completed?

Strong hints
White Wave, as I mentioned, owns several plant-based food brands that are riding the wave of healthier shoppers and wellness-peddling markets. The strategy, thus far, has worked out. In its preliminary earnings report, White Wave showed investors and analysts strong double-digit earnings growth, while sales grew more modestly. The results were driven by a bump in volume, even though its sales growth was less than half that of the profit growth.

Though shelf space is becoming more crowded by the day, White Wave has been able to use smart marketing campaigns and product innovation strategies to win market share and drive sales.

White Wave was spun off from Dean Foods as part of the latter's cost-cutting and deleveraging strategy. Dean Foods has, for years, been mired in debt and struggling with decreased dairy consumption -- a threat to its core line of business. Spinning off White Wave was one-half of the three-part strategy, which also included selling the Morningstar division for a net benefit of more than $800 million and streamlining the dairy operations.

The company recently delivered predicted earnings of $0.16 per share -- a 28% jump over last year's number and indicating that the high growth this company (and industry) is experiencing is by no means over. Net sales for the quarter are set to hit $616 million -- a 10% increase. White Wave is seeing healthy volume growth across all of its platforms, suggesting that these results are not short-term bumps, but a sign that more and more people are turning on to the products offered.

Even the universal trouble spot for companies -- Europe -- is proving to be a growth area for the company, with sales up an estimated 13% year over year based on, again, volume growth.

So what's next for the company, and is it a buy?

Rich present, rich future
White Wave is set for more growth going forward -- that much is clear. But it's the short-term elements that are a bit more interesting. The company is completing its equity-for-debt swap with Dean Foods, whereby the former parent will relinquish nearly 30 million more shares at a price of $17.75. Once this is out of the way, the market will more clearly evaluate the operating performance of White Wave.

The company is priced at 22.4 times forward earnings -- a bit too rich for price-conscious investors. That is not, however, a reason not to buy. Growth investors who like the plant-based food story should take a close look at White Wave. It is a well-managed, well-branded company that will continue to thrive for the foreseeable future. For the Street and investors, the next few months should show more clarity and more growth.

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