WhiteWave Premium Pricing May Be Worth It

While its former parent Dean Foods is struggling to bounce from its 52-week lows and experiencing dire industry conditions, plant-based food company WhiteWave Foods (NYSE: WWAV  ) is having a polar experience -- trading into fresh highs this week after posting a stellar earnings report. Beyond the health and sustainability benefits of plant-based foods, it's a more steady food segment when it comes to input costs. With recent acquisitions and a joint venture in China, WhiteWave has an attractive growth runway that could keep things moving for years to come. The question for investors is, after a 10% bump this week, is WhiteWave a reasonable buy today?

Organic
The bottom line grew 22% in WhiteWave's fiscal fourth quarter to $0.22 per share -- $0.02 ahead of analyst estimates. For the full year, earnings grew just about in line -- up 23%.

WhiteWave has three segments: plant-based food and beverage, premium dairy, and coffee creamers.

The first segment includes the largest brand-name dairy alternative products on the market: Silk. Sales of Silk's soy, coconut, and almond milks continued their strong growth patterns. Almond milk is leading the way with massive sales growth of 60%.

Boring old regular dairy products are doing well, too, but that's because WhiteWave owns Horizon -- an organic dairy business. Sales were up 5%. A brief look at Dean Foods' dairy business shows the reality of conventional dairy products in today's sky-high-costs environment.

Coffee creamers showed 13% growth -- driven by away-from-home products such as Dunkin' Donuts-branded creamers and the standard International Delight brand seen in every diner from one U.S. coast to the other.

More to come
Can the growth continue for WhiteWave? In a word, yes. Besides management's guidance for net sales growth in the high 20s, which was in line with expectations, there is other evidence that WhiteWave has even brighter times ahead.

For one thing, the company recently bought Earthbound Farms -- the biggest brand in North American organic produce. WhiteWave paid a hefty $600 million for the company, but this doesn't appear to be too much considering the industry tailwinds and Earthbound Farms' tremendous brand presence. The brand had more than $500 million in sales in 2013.

Also on the docket is a fresh joint venture with the Chinese Mengniu Dairy Company to produce and sell WhiteWave products in the region. How much this will add to the bottom line is yet to be known, but the company's continual exposure to fast-growing markets is good news for investors.

Does it add up?
So, we know that things are going well for WhiteWave and will continue to in the foreseeable future, but can investors buy today and expect continued capital appreciation?

The company trades at 24.6 times forward earnings estimates -- certainly rich but not totally out of the ballpark. With its recent added debt due to the Earthbound Farms purchase, it has a rich EV/EBITDA of nearly 16 times.

As WhiteWave expands its brand portfolio and enters new, more diversified areas of the food business, we can compare it to other conglomerates. Companies like General Mills, which is growing much slower, trades at about 16 times earnings, while all-organic snacks and meals purveyor Annie's trades at 33 times earnings.

At a glance, WhiteWave is certainly priced for high growth, but does not appear to be overvalued given its prospects. Investors should consider the downside risk inherent in a fast-moving, richly valued industry such as organic and natural foods, but WhiteWave is proving to be one of the best players in the game. If growth is on your portfolio wishlist, this company may be a great addition.

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