If you want to invest in ubiquitous retailers, grocery-store stocks might seem logical. After all, most of us spend more time than we'd like in grocery stores. However, investors should carefully weigh the strongest stocks in that highly competitive retail category, and choose wisely before they start filling their carts.

Avoid the impulse purchase
Let's look at a few key metrics for several grocers:

Company Name

Earnings/Loss Per Share (TTM)

Revenue Increase/Decrease (TTM)

Gross Profit Margin

Debt-to-equity Ratio

Safeway (NYSE: SWY)





Whole Foods Market (Nasdaq: WFMI)





Kroger (NYSE: KR)





Weis Markets (NYSE: WMK)










*All data from Capital IQ; TTM = trailing 12 months.

You can get fresh produce at any of the companies above, but where fresh investments are concerned, some of these stocks are seriously lacking. As you can see, many struggle with low or no profitability, anemic or flagging sales, and uncomfortably high debt loads.

In addition, while these are major companies, some may be hard pressed to find additional growth in the current retail landscape. Safeway, for example, has more than 1,700 stores, compared to around 300 for Whole Foods Market.

On the face of it, Whole Foods may sound like a heck of a pricey stock at 30 times trailing earnings. But judging by this data, you can see why some investors might be tempted to pay a premium. The organic grocer boasts impressive revenue growth, along with several other signs that it's in far better financial condition than many of its rivals.

First, its debt load is manageable. Second, its margins are far higher to those of conventional grocery-store rivals (which has led some wags to nickname Whole Foods "Whole Paycheck"). The pleasant experience and a sense of purpose that Whole Foods provides also helps to differentiate it from more middle-of-the-road, conventional grocery rivals. And as I've mentioned before, it still has plenty of room to grow its store counts.

Weis Markets also looks like an interesting stock to keep an eye on. Granted, this is a tiny grocer. It runs less than 200 stores in a few states on the East Coast, mostly concentrated in Pennsylvania. Its market cap is a mere $920 million (compared to Safeway's $7.7 billion). However, Weis is solidly profitable, reported a relatively robust revenue increase in the last 12 months, and has no debt load to hinder its profitability. It trades at just 13 times trailing earnings.

Some stocks are safer than others
Investors considering grocery stocks shouldn't underestimate the industry's highly competitive climate, where such stores vie heavily for shoppers' dollars.

The grocery segment increasingly must do battle with retail behemoths and renowned price-cutters like Wal-Mart (NYSE: WMT) and Costco (Nasdaq: COST). The latter two represent major competition; not only do they offer lower prices on much of the same merchandise grocery stores offer, but they also allow shoppers to pick up clothes, electronics, and other goods. Never underestimate the power of the one-stop shopping experience.

There are also plenty of strong privately held grocery chains growing their store counts across the country and threatening these publicly owned companies. Wegman's, Harris Teeter, Trader Joe's, and many others want a spot on consumers' shopping lists, too.

Given such fierce competition, it's important to weigh your grocery-stock choices with care, mindful that elements like hefty debt and flagging revenue can create a seriously risky stock.

Pick your favorites in the grocery space in the comment box below.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.