Wild Oats (NASDAQ:OATS) may have reported a better third-quarter profit than it managed last year at this time, but there are some troubling signs, and I'd say investors should hold on before checking out at this organic and natural foods grocer.

Third-quarter net income at Wild Oats came in at $3.1 million, or $0.10 per share, compared with a profit of $82,000, breaking even per share, last year. Sales increased 4.8% to $291.8 million. Same-store sales increased a mere 1.6%, vs. a 6.1% increase in the third quarter last year. The company missed its own guidance for a comps increase of 3% to 4%, blaming the miss on the tough comparison with last year and the "continued impact of new competition." (It fell short of Wall Street's sales expectations as well.)

Granted, Wild Oats improved its profitability during the quarter, lifting gross profit margin and reducing expenses. In addition, Pathmark (NASDAQ:PTMK) said it will sell Wild Oats-brand goods in its stores. However, there are certain other elements to heed. For example, Wild Oats may have a modest cash hoard of $65.1 million, but it has more than twice that amount in debt.

Plus, it's well known that the competition to provide organic (or gourmet) goods is getting steeper all the time. And it's not just specialty grocers like privately held Trader Joe's; conventional names like Safeway (NYSE:SWY) and Wal-Mart (NYSE:WMT) also want to provide similar wares to mainstream shoppers, posing considerable competitive pressure for companies like Wild Oats.

Investors freaked out about Whole Foods Market's (NASDAQ:WFMI) outlook last week amid increasingly aggressive competition (I believe they overreacted, but the competitive element is a real issue). I prefer Whole Foods because it's arguably the leader and the innovator in the industry, making it the benchmark for other companies when it comes to the organic and natural foods lifestyle. If the competition is getting rougher, which signs do indicate, I'd venture to guess that Wild Oats faces more pressure because it doesn't have near the quality of leadership that Whole Foods has worked hard to foster while carving out its niche in grocery retailing. There's a good argument that when investing for the long haul, one should look for the absolute leaders in an industry.

Speaking of leaders, Wild Oats is still in the process of searching for a CEO. That's another area where Whole Foods excels, considering that it's led up by John Mackey, who's a founder of the company and well acquainted with the organic industry and lifestyle.

It's not hard to see, then, why Wild Oats' P/E of 41 might make it look, well, wildly pricy at the moment. For now, I see little reason for investors to be wild about Wild Oats.

For related Foolish commentary, see the following articles:

Wal-Mart is a Motley Fool Inside Value recommendation and Whole Foods Market is a Stock Advisor pick.

Alyce Lomax does not own shares of any of the companies mentioned. As of this writing, she is ranked 2,517 out of 12,346 players in CAPS.