More on Worthington
Plus, This Week in Dripland

by Vince Hanks (TMFElwood)

NORTHVILLE, MI (July 30, 1999) -- Last week, we reviewed the history and recent performance of Worthington Foods (Nasdaq: WFDS), the market leader in meat and egg alternative food products. We'll continue that this week, beginning with the highlights of the latest quarterly report, which was released last week.

For the 13-week period ended July 2, 1999, Worthington recorded revenues of $45,951,000, a 27.5% increase over the comparable period last year. Leading the march was a 38.9% increase in retail sales of Worthington's top brand, Morningstar Farms, which was boosted by a 44.5% rise in meat alternative sales.

International and Seventh-day Adventist market sales rose 13.1% and food service sales saw an improvement of 8.0%

Operating expenses increased 45.3% from the same period last year due to higher sales and distribution costs associated with higher sales volume and a significant increase in advertising spending.

Earnings came in at $0.20 per diluted share, falling 16.7% period over period, and in line with consensus analysts' estimates.

Trading around $14 and change as of this writing, Worthington Foods is priced at a multiple of 24.2 times trailing 12 month (TTM) earnings and 1.12 times sales. With earnings per share slated for $0.94 in 2000, the stock is priced at 14.9 times 2000 estimates.

Let's compare the king of soy to a few other industry leaders in the food & beverage industry, looking in the areas of price to earnings, price to sales, price to earnings estimates for FY 2000, debt to sales ratio, net margin, and dividend payout ratio.

                     P/E  P/S  P/E2K  D/S    NM    PR 
Worthington Foods:  24.2  1.12  14.9  21.2   4.6  13.8    
(Nasdaq: WFDS)

Anhueser-Busch:     29.2  3.22  24.5  41.3  11.3  41.5 

William Wrigley Jr: 33.1  4.78  27.7  0.00  14.8  44.2

Campbell Soup:      19.6  2.98  22.8  20.8  12.9  38.2

Coca-Cola:          48.8  8.11  40.0  3.65  16.7  47.7

As you can see, Worthington Foods seems to be trading as a discount to some of its distant cousins. Whether or not the market will ever reward it the kind of multiples these enormous consumer brands command is another question, of course.

If the company can continue to expand its product line, entrench its brand names in the minds of the expanding population seeking low-fat and meat-free food products, and begin to consistently grow earnings quarter over quarter, it's likely a bargain at current prices.

I conclude from this initial look that Worthington Foods has some potential and is worth keeping an eye on. To be an ideal candidate in my mind, net margins will need to come up significantly and long-term debt, as a percentage of sales, will need to decrease. I'll check back next quarter and see if any progress has been made on these fronts.

Touchstone Friday. News out of Finland's Raisio food group today is that its U.S. partner (Johnson & Johnson's) McNeil division will begin shipping four new salad dressings containing the cholesterol-lowering ingredient Benecol. It is also expected that Benecol yogurts will soon follow.

Recent reports have suggested that the newly released Benecol margarine has earned a 4% U.S. Market share, however, Raisio spokesman Jarkko Heino declined to confirm these numbers.

"We have no comment on that one way or the other," he said.

'Twas another week of motley collaboration as we were once again treated to four unique perspectives in the Dripfolio columns.

Leading us off on Monday, George continued the "Buy What You Know" series by refining his "I Love This Company" stock selecting system.

Special community guest writer GLSmyth was in the spotlight on Tuesday, as he Foolishly shared with us his technique for Drip contribution allocation. It was a pleasure hearing from George this week and we'd love to hear from many more of our community members in the Drip Port columns in the future. If you would like to contribute a column, drop a line to JeffF@fool.com. Bribes are encouraged, but not required.

Hard to believe we're two already! Donning a party hat and trumpeting a kazoo, Jeff on Wednesday celebrated the two-year anniversary of the Drip Port with a look at we're we've been, where we're going, and what we can do better. It's been a tremendous two years as we've grown as a community of Dripping Fools! And stay tuned, it's only gonna get better!

Brian "the brain" Graney completed the second-quarter earnings season wrap-up on Thursday by putting Mellon Bank through the coin-sorter. See how Mellon fares when put through the quarterly checklist.

Two years down. Eighteen to go -- and then some. Have a great weekend, Fools!

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