Whole Foods Market, Inc. (WFM), Chipotle Mexican Grill, Inc. (CMG): Investing in Organic Food

Back in November, a blogger attacked Annie’s for its excessive valuation, noting that at the time shares were trading at 123 times the company’s 2012 free cash flow of $6 million. Despite that criticism, shares have remained firm, and are up over 11% since the company began trading roughly a year ago.

While Hain Celestial is a collection of organic and natural brands, Annie’s is a single brand in particular with a bunny logo on its packaging.

Recently the company saw some insider selling, as it priced 525,000 shares at $40 on Mar. 13.

Chipotle Mexican Grill, Inc. (NYSE:CMG) is the closest thing to an organic fast food play

When it comes to playing organic restaurants, Chipotle Mexican Grill, Inc. (NYSE:CMG) is the best option for investors. The company freely boasts of its commitment to quality natural and organic ingredients (what it calls “food with integrity”), though it admits that it sources organic produce “when practical” and uses naturally raised meat “whenever possible.”

Over the last year, Chipotle Mexican Grill, Inc. (NYSE:CMG) shares are down over 23%, but are actually up since famed short seller David Einhorn named the company a bearish bet back back on Oct. 2. Einhorn argued that Chipotle Mexican Grill, Inc. (NYSE:CMG) was exposed to growing competition from rival Taco Bell, and suggested that shares were overvalued.

Ironically, it is Chipotle’s organic image that insulates the company from competition from Taco Bell. As for valuation, Chipotle’s price-to-earnings ratio of roughly 37 is more than twice the broader S&P 500’s, but is much lower than rival Wendy’s nearly 318 P/E ratio.

Organic food: here to stay?

Despite their growing popularity, organic foods remain a somewhat controversial subject. A number of studies have cast doubt about claims that organic foods are healthier or better tasting.

Still, a growing base of consumers continue to demand higher quality foods. That could be good for shares of companies built around that market, including Whole Foods, United Natural Foods, Hain Celestial, Annie’s and Chipotle.

The article Investing in Organic Food originally appeared on Fool.com and is written by Salvatore “Sam” Mattera.

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