Does Annies Inc (BNNY)’s Growth Match Its Valuation?

Health-food purveyor and proud owner of sky-high valuation multiples Annies Inc (NYSE:BNNY) showed Wall Street that a still-cautious spending environment couldn’t slow down the growth of this market darling. The company reported strong fourth-quarter results, beating both top and bottom lines, yet the stock still sank a few points on the day. Annie’s is a difficult company to say negative things about, since it is a well-run company with a great product lineup that is, indeed, set for substantial growth. But, ever the pessimist, I find this stock to still be priced for the heavens.

Healthy earnings
For the fiscal fourth quarter of 2013, Annies Inc (NYSE:BNNY) brought in $52.2 million in revenue — a little bit more than the Street’s estimated $50.73 million. On the bottom line, things looked much more impressive, with the company hauling in an adjusted EPS of $0.29 per share. The figure comes in more than 20% higher than the year-ago quarter and about one penny over analyst estimates.

The beat apparently came to management’s surprise as well, with CEO John Foraker noting that the figures exceeded internal expectations and were mainly due to stronger-than-forecast consumer consumption trends.

Investors should note that the strong results come in the face of the company’s difficult period near the end of January, when it voluntarily recalled a frozen pizza product from shelves. Annies Inc (NYSE:BNNY) also introduced a few new products, from organic rising-crust pizzas to organic graham crackers, which management claims is tracking strongly with customers.

Looking forward, management expects “accelerated growth,” intimating that we can expect continued double-digit year-over-year growth in the near term. This has largely been the story since Annies Inc (NYSE:BNNY) debut on the markets 15 months ago. Since then, the stock has ticked up a little more than 16%.

Headed higher?
Logically, and by my own investing methodologies, I would say that Annies Inc (NYSE:BNNY) does not have much vertical room. The company is still trading too rich for any value-conscious investor — its EBITDA trades at 36 times its enterprise value, and it faces growing competition, often offering similar products, in a hot, hot industry.

But as we know all too well, that can often mean nothing in the world of Mr. Market. The colorful all-powerful being that determines short-term stock movements is impressed by big, impressive numbers. Annies Inc (NYSE:BNNY) has those. Mr. Market likes a business that’s in a wicked-cool industry — Annie’s is in the most exciting segment of the food business.