Whole Foods Market, Inc. (WFM), The Fresh Market Inc (TFM), Natural Grocers by Vitamin Cottage Inc (NGVC): Organic & Natural Food Retailers, How Do The Players Stack Up?

Some analysts think margins could be hurt in the future due to the company’s competitive pricing strategy implemented to gain market share. While that’s a legitimate concern, it will prove to be a good decision if the increased sales add more to the bottom line than contracted margins subtract from it.

The Fresh Market Inc (NASDAQ:TFM)’s revenue and EPS rose 12.9% and 14.8%, respectively, and comparable store sales rose 3% in its first quarter ending April 29. It reports second quarter results on Aug. 28. Analysts expect EPS growth of 21% next year and an average of 20.4% over the next five years.

Natural Grocers by Vitamin Cottage Inc (NYSE:NGVC) revenue and net income rose 30.5% and 31.1%, respectively, in its fiscal third quarter ending June 30. This isn’t an apples-to-apples comparison with the prior year’s quarter, as the company purchased a 45% non-controlling interest in Boulder Vitamin Cottage (which owns five stores in Colorado) in July 2012. On a pro-forma basis (as if the company owned the remaining interest since the start of 2012), net income increased 19.5%. Comparable store sales rose 10.4%. Analysts expect EPS growth of 87% this year, 28% next year, and an average of 26.5% over the next five years.

Natural Grocers by Vitamin Cottage Inc (NYSE:NGVC) is a mixed bag — great comparables and strong growth expected, but margins and valuation are drawbacks. Additionally, it had negative FCF over the trailing twelve months. Granted, it’s using the cash for expansion, but it’s still a drawback when compared to Whole Foods and The Fresh Market, which fully funded their expansions with cash from operations. I’d wait a quarter or two to see which direction things move.

Bottom line

Organic food sales are projected to grow at about an 8% annual clip for at least the next five years. That growth rate increases if the more ambiguous “natural” and “healthy” foods are included.

Investors wanting to add a retailer specializing in this niche to their cart should consider Whole Foods. It has great margins and comparable store sales, and, while growth rates have slowed, they’re still strong. The Fresh Market and Natural Grocers, in that order, also bear watching.

The article Organic & Natural Food Retailers: How Do The Players Stack Up? originally appeared on Fool.com and is written by BA McKenna.

BA McKenna has no position in any stocks mentioned. The Motley Fool recommends The Fresh Market and Whole Foods Market. The Motley Fool owns shares of Whole Foods Market.

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