Whole Foods Market, Inc. (WFM), The Fresh Market Inc (TFM): What’s Best of Breed in the Organic Aisle?

At first glance, The Fresh Market Inc (NASDAQ:TFM) looks like the cheapest name in the space. The stock trades at only 25 times forward earnings and sports a 1.2 PEG ratio. Case closed! The Fresh Market Inc (NASDAQ:TFM) is clearly best of breed.

But the company has had problems recently. The Fresh Market Inc (NASDAQ:TFM) has missed estimates in its last two quarters and several executives have left the company to pursue other opportunities  This calls into question whether the company has the managerial talent needed to execute its growth plan. In addition, the company lowered in 2013 EPS guidance to $1.55. Significantly lower than the $1.69 the street had been looking for.

Given these problems, the discount may be deserved.

Whole Foods Market

Which brings us back to ol’ Whole Foods Market, Inc. (NASDAQ:WFM). The company has a clean balance sheet with only $24 million in long-term debt while generating ample cash flow from operations to fund expansion. Whole Foods Market, Inc. (NASDAQ:WFM) has roughly 350 locations with room to open 1,000 stores in the United States in addition to international possibilities. Given the company’s strong national brand, it shouldn’t have any problems becoming established in new markets. Plus the company’s size gives Whole Foods Market, Inc. (NASDAQ:WFM) the best margins in the industry.

No doubt, based on the fundamentals Whole Foods Market, Inc. (NASDAQ:WFM) is top name in the space.

Investors may quibble on Whole Foods Market, Inc. (NASDAQ:WFM)’ valuation. At 25 times forward earnings, the stock sports a premium 1.3 PEG ratio. But when picking stocks, it’s always desirable to pay up for best of breed. It’s the peace of mind.

The article What’s Best of Breed in the Organic Aisle? originally appeared on Fool.com and is written by Robert Baillieul.

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