Whole Foods Market, Inc. (WFM), The Fresh Market Inc (TFM): Add This Grocer to Your Portfolio for Healthy Returns

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It opened around 16 stores last year and has plans of opening around 22 stores in this fiscal year. In its latest earnings report, it beat analysts’ expectations and reported a 15% increase in profits and 13% increase in sales.

The stores count of The Fresh Market Inc (NASDAQ:TFM) is half that of Whole Foods, and the stores are also smaller in size. The Fresh Market Inc (NASDAQ:TFM) has increased perishable products in its product mix and has also been improving its in-store customer services. It has a one-year forward P/E ratio of 26, slightly lower than Whole foods 32. The Fresh Market Inc (NASDAQ:TFM) has tremendous growth opportunities available, which will definitely reap long-term returns.

Natural Grocers is run by the Isely family and has over 60 stores in 13 states. Even though it has been in the organic business for longer than Whole Foods and The The Fresh Market Inc (NASDAQ:TFM), it is not very focused in its expansion plans.

In the company’s latest earnings report, it reported a 25.4% increase in its revenue. For this quarter, same-store sales grew by 10.4%. Even though its shares have skyrocketed, its valuation doesn’t make it look attractive. The following table makes a comparison in the valuations of two companies:

Whole Foods has a higher gross margin as compared to Natural Grocer. With a lower PEG ratio and a lower forward P/E ratio, Whole Foods is better valued. Natural Grocer looks slightly overvalued to me.

Foolish bottom line

Rising healthcare costs have become a huge concern for the consumers today. A gradual shift toward organic food and a healthy diet has been gaining momentum. Solid expansion plans, great operating performance and increased demand for organic food definitely makes Whole Foods a good investment. Add this stock to your portfolio and earn healthy returns.

usha patodia 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. usha is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

The article Add This Grocer to Your Portfolio for Healthy Returns originally appeared on Fool.com is written by usha patodia.

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