The organic market isn’t just a passing fad, it’s a global business worth $31 billion a year and counting. But perhaps even more surprising is that the company that founded on mac n’ cheese would be the underrated player to beat…
I find it hard to hate any business that’s doing its part to care for planet earth…even more so if they’re making money and doing it the right way.
From locavore restaurants to organic grocers, the rise of conscious consumption is undeniable.
Even in cases when true environmental stewardship is sometimes called into question, as long as it’s labeled green…there will be people buying.
I’ll give you an example…
The automotive industry is notorious for their “greenwashing”, where the promotion of green vehicles often hides the massive carbon footprint that is generated during their assembly and transportation.
The National Geographic estimates that it takes roughly 450,000 gallons of water to produce a single small vehicle.
And depending on the size of the car, it can generate anywhere from 6 to 35 tonnes of CO2e when you factor in things like metal extraction from the ground, production and shipment of various car parts from around the globe, to even the pollution caused by employees driving their own cars to the assembly plant.
Yet hundreds of thousands of vehicles are sold every year, and the sale of hybrid and electric cars are on the rise.
However, as sustainability gains more traction in the public consciousness, it’s going to be hard to fool consumers for much longer.
As a whole, we’re becoming more critical, and mainstream media has done a lot to expose corporate practices.
And when we learn of companies whose corporate responsibility measures really aren’t all that responsible, there can definitely be a risk of consumer backlash.
The reality, though, is that no business can be totally free of emissions and waste, especially when it comes to manufacturing goods for sale.
For the most part, consumers are aware of that.
While they appreciate a company’s efforts in reducing its carbon footprint, they also know that eliminating it entirely is practically impossible.
Instead, the call for things like transparency, testing, stakeholder input, and community participation are perhaps just as significant as trying to be carbon-free the best they can.
And one company that’s done a tremendous job at that is Annie’s Inc. (NYSE:BNNY).
Top Green Retail Stock To Buy Today:
Annie’s has been in business for twenty years and is a pioneer in the purveying of organic and natural food products into the mainstream market.
Most notably, it was the popularity of their signature organic macaroni n’ cheese box pasta that brought them to the forefront.
It went public in March 2012 and was an immediate hit — rising 89% to nearly $36 on its opening day. At the time, it was the biggest opening day gain for an IPO since LinkedIn in May 2011.
On the strength of its flagship product, Annie’s enjoyed a decent run and has maintained its profitability each year.
However, after peaking last fall, the stock lost momentum as organic input costs increased and investors weren’t content with what was essentially a one-trick pony (mac n’ cheese) with a few balloons (e.g. pizza, frozen entrées).
In response, management has focused on their ancillary offerings and have stated that many of their new products are gaining traction in the marketplace.
For their 3rd quarter of fiscal 2014, adjusted diluted EPS was $0.17 compared with $0.15 a year prior. Adjusted net sales were $46.1 million for the quarter, up 21.7% over Q3 of fiscal 2013.
Adjusted EBITDA for the third quarter was $5.6 million, up 8% over the prior year, while gross margin for the quarter was 38.7%.
The Company is expecting an EPS of $0.98 for full-year fiscal 2014, which currently gives them a price-to-earnings ratio of 40.
Despite their cost headwinds, Annie’s possesses a solid balance sheet and no debt.
With their overall business still expected to grow in the 20%-range for the year, the long-term growth outlook makes Annie’s a confident buy.
Speaking on the rise of conscious consumption, CEO John Foraker points out that “…there are tectonic shifts happening in our space and in the broader retail environment as millennial consumers drive more and more purchase decisions for families. These consumers seek natural organic foods, high levels of transparency, digital engagement, and trusting relationships with the brands that show their values.”
So while they have to contend with market forces like any other company, Annie’s remains true to its sustainability values, which builds trust in customers and investors.
In turn, any positive swing in the green movement is going to propel Annie’s stock.
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