Shares of WhiteWave Foods (NYSE: WWAV ) recently jumped by around 11%, driven by strong fourth-quarter earnings results. Investors who bought WhiteWave when it was spun-off from Dean Foods (NYSE: DF ) could have realized a gain of nearly 70% within a year. Let's take a closer look to determine whether or not WhiteWave Foods is more attractive than its ex-parent Dean Foods and its fellow cereal maker Post Holdings (NYSE: POST ) after its impressive fourth-quarter results.
WhiteWave's double-digit growth
WhiteWave is the owner of several plant-based food and beverage brands, and other premium dairy product brands that include Silk, Alpro, LAND O LAKES, and Delight. WhiteWave has grown its business quite nicely, with net sales rising from $1.45 billion in 2009 to more than $2.5 billion in 2013. In the fourth quarter of 2013, WhiteWave Foods managed to grow its adjusted net sales by 11%, from $609 million last year to $679 million this year.
WhiteWave's adjusted net income has surged by 24% year-over-year from $31 million in the fourth quarter of 2012 to $39 million in the fourth quarter of 2013. Adjusted earnings per share experienced 22% growth to $0.22. However, GAAP net income declined by 39% to $18 million, mainly due to asset disposal and exit costs relating to its soy-based meat alternative business in the Netherlands, the non-cash writedown of the assets of its Idaho dairy farm, and other costs relating to the spin-off from Dean Foods.
Both WhiteWave and Post Holdings could grow with their recent acquisitions
To foster future growth, WhiteWave bought Earthbound Farm at the beginning of 2014 for $600 million. Earthbound is considered to be the biggest organic produce brand in North America and the largest non-dairy organic brand in the U.S. with sales of more than $500 million. It owns as much as 45% market share in the organic packaged salad market and a 55% market share in the branded organic packaged salad field, three times more than the share of its next closest competitor. Thus, the Earthbound acquisition will enhance WhiteWave's leadership position in the North American organic industry. The acquisition is also expected to add around $0.07 per share to the company's 2014 adjusted EPS.
Peer Post Holdings also relies on acquisitions to boost its branded organic portfolio. Recently, Post Holdings has announced that it will acquire the PowerBar and Musashi brands from Nestle's sports nutrition business. Post Holdings could pay up to 400 million Swiss francs ($448.3 million) for those two brands, which generated around 200 million Swiss francs ($221 million) in annual sales. This acquisition could potentially increase the sales of Post's nutrition business to around $550 million per year. Previously, Post Holdings spent $320 million for Canadian peanut-butter maker Golden Boy and another $380 million for protein-bar manufacturer Dymatize.
Which is the cheapest?
Valuation-wise, Dean Foods has the lowest earnings valuation of this group as it trades at only 13 times its forward earnings. Both Post Holdings and WhiteWave are valued at quite high forward P/E ratios of 26.15 and 24.7, respectively. However, Dean Foods also has lower growth potential than the other two companies. If potential growth is incorporated in the valuations, Post Holdings has the lowest PEG ratio of the group at only 1.07. While the PEG ratio of Dean Foods is 1.47, WhiteWave is the most expensive as it has the highest PEG ratio at 1.56.
My Foolish take
WhiteWave could drive its business forward with its recent acquisition of Earthbound. However, since it has a higher PEG ratio than Post Holdings and Dean Foods, I would rather wait for any future price correction before initiating a long position in WhiteWave. Post Holdings, trading with a 1.07 PEG ratio, might represent better upside potential at its current stock price.
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