Late last year, Dean Foods (NYSE:DF) spun off its valuable health-oriented foods business, WhiteWave Foods (NYSE:WWAV). Spinoffs can often be great pools for diligent investors to take a dip as they are frequently discarded by Wall Street and underappreciated by the mainstream investing community. For WhiteWave, though, a rich valuation kept the stock from really taking off in its early market days. Last week, the company released its fourth-quarter and full-year earnings report. The Street was unimpressed, and the stock sunk around 5% by the end of the week. Let's take a look at the company's earnings, what lies ahead, and if the valuation is still too rich for bargain-hunting investors.

How much is that growth in the window?
Trading at over 18 times its forward one-year earnings, WhiteWave would appear to be a very expensive food stock. Though the healthy and sustainable food movement may well be  the fastest-growing area in the industry , it is hard to stomach that kind of price among the fiercely competitive, low-margin food purveyors.

So what are investors getting for that premium price?

For the fourth quarter of 2012, WhiteWave grew earnings by 34% over the prior year's quarter, and for the full year that number was an equally impressive 31%. Fourth-quarter net sales grew 12% to $609 million while the full year grew 13% to $2.3 billion. It was certainly a strong performance for a year in which commodity prices hurt many major food companies. WhiteWave has now grown its earnings for 12 consecutive quarters -- evidence of the double-digit growth in the health-food business.

While the plant-based food business has been growing at a fast clip, company management notes that U.S. household penetration is still in the mid-20s, leaving plenty of runway for a company like WhiteWave.

By the looks of it, investors are paying a high price for high growth. But we need to take a closer look at some of the fundamentals to further determine the value of WhiteWave.

My favorite part of the company is its Silk line of non-dairy alternative products. Silk is the No. 1 brand in grocery stores for soymilk, almond milk, and coconut milk. It is one of the biggest growth drivers for the entire non-dairy segment. This line of products continues to grow at a high rate -- 20% in 2012.

Silk is introducing iced latte products to shelves that leverage another part of WhiteWave -- International Delight creamer products. The high-margin, pre-made coffee drinks offer customers a non-dairy alternative to popular items such as Starbucks Frappucinos and espresso beverages. The company is also expanding its line of non-dairy yogurts.

While Silk is my favorite brand under the WhiteWave umbrella, the company also has strong dairy lines as well, mainly Horizon Organic. Many shoppers are content with private-label milk products from their favorite grocery store, but when it comes to organic milk, I see Horizon products on the shelves far more frequently than any other. It has a strong brand that commands a price premium that helps keep margins up in the very difficult fluid milk business. Former parent company Dean Foods has suffered in recent years from the high price of feed for its dairy cows and low prices for conventional milk products in stores.

WhiteWave's premium dairy business is projected to grow in the mid-single digits in 2013. Household penetration of premium dairy remains low at just 10%, and I believe that, as that number grows, more and more people will recognize and patronize the Horizon brand.

The company has a great stable of names to drive growth going forward and possibly justify the price premium in its stock.

Looking forward
WhiteWave net sales are projected to grow in the high- single digits in 2013, driven by volume increases. In the latter half of the year, management expects to increase capacity that is currently a restraint on the company's output and its operating costs. If the process stays on schedule, we should see the back half of the year yielding fatter margins and even bigger sales figures.

I imagine the second quarter won't be a great one as the company expects larger operating costs in the first quarter, which should hold down the bottom line. But once that event passes and Wall Street overreacts, WhiteWave may enter a reasonable price territory and be ripe for the pickin'. As always, only invest in businesses in which you are knowledgeable and comfortable.

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