Lakewood, Colo.-based specialty retailer Natural Grocers by Vitamin Cottage, Inc. (NGVC) manufactures and sells natural and organic groceries and dietary supplements. As of Feb. 1, 2022, NGVC operated 162 stores across 20 states.

The company has been attracting significant investor attention lately due to rising food prices and shifting consumption patterns. Shares of NGVC have gained 37.2% in price year-to-date and 75.5% over the past six months.

The company has been planning to capitalize on elevated food prices and shifting consumption patterns toward organic products. As of February 3, NGVC leased or acquired properties for an additional six new stores planned for its fiscal 2022. The company plans to open four to six new stores in fiscal 2022 and remodel/relocate three to four stores. Also, the company stated in its fiscal 2022 guidance that it expects its daily average comparable store sales to grow 0-2% year-over-year, while EPS is expected to come in the range of $0.75 to $0.87. Furthermore, Wall Street analysts expect NGVC’s EPS to rise at a 5.1% CAGR over the next five years.

Here is what could shape NGVC’s performance in the near term:

Robust Financials

NGVC’s revenues increased 4.6% year-over-year to $277.30 million in its fiscal year 2022 first quarter (ended Dec. 31, 2021). This can be attributed to a 3.8% rise in daily average comparable store sales. The company’s net income came in at $8.90 million, up 145.5% from the same period last year. Its EPS rose 143.8% from its  prior-year quarter to $0.39. In addition, the company’s adjusted EBITDA increased 44.7% year-over-year to $19.50 million.

NGVC Co-President Kemper Isley said, “Our differentiated offering of the highest quality natural and organic products at Always AffordableSM Prices continues to drive robust demand from consumers. Furthermore, we appreciate the ongoing dedication and commitment of our crew in executing our operating strategies, including exceptional customer service.”

Impressive Growth Story

NGVC’s revenues have risen 8.2% over the past five years, while its EBIT and net income have increased at CAGRs of 15.5% and 21.5%, respectively, over this period. The company’s EPS has risen at a 21.5% rate over the past five years, while both tangible book value and total assets improved at a 2.2% CAGR over this period.

Also, NGVC’s revenues have increased 7.1% CAGR over the past three years. The company’s EBIT and net income have risen  at CAGRs of 28.1% and 38.8%, respectively, over the past three years. In addition, its EPS has risen at a 38.4% rate per annum over the past three years, while its levered free cash flow rose at a 22.6% CAGR over this period.

Discounted Valuation

In terms of trailing-12-month P/E, NGVC is currently trading at 17.19x, which is 23.8% lower than the 22.57x industry average. And its trailing-12-month EV/Sales multiple of 0.76 is 59.2% lower than the 1.85 industry average.

In addition, the stock’s 0.42 and 8.29  respective trailing-12-month Price/Sales and Price/Cash Flow ratios  are significantly lower than the 1.38 and 14.83  industry average. Also, NGVC’s 12.22 trailing-12-month EV/EBITDA multiple  is 4.7% lower than the 12.70  industry average.

POWR Ratings Reflect Rosy Prospects

NGVC has an overall A rating, which equates to Strong Buy in our proprietary POWR Ratings system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.

The stock has a grade of A for Sentiment and a B for Growth and Stability. The company’s bullish growth prospects justify the Sentiment grade, while its impressive growth prospects are in sync with the Growth grade. Also, NGVC’s 1.01 beta is in sync with the Stability grade.

Among the 39 stocks in the A-rated Grocery/Big Box Retailers industry, NGVC is ranked #2.

Beyond what I have stated above, view NGVC ratings for Momentum, Value, and Quality here.

Click here to checkout our Retail Industry Report for 2022

Bottom Line

NGVC is a leading organic food and dietary supplements manufacturer. With solid financials and profit margins, the company is well-positioned to benefit from the industry tailwinds to boost its growth trajectory. Currently trading at a discount to its peers, we think NGVC stock is an ideal investment bet now.

How Does Natural Grocers by Vitamin Cottage (NGVC) Stack Up Against its Peers?

NGVC has an overall POWR Rating of A, equating to a Strong Buy rating. Check out these other stocks within the Grocery/Big Box Retailers industry with A (Strong Buy) ratings: Albertsons Companies, Inc. (ACI), Village Super Market, Inc. (VLGEA), and Ingles Markets, Incorporated (IMKTA).

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NGVC shares were trading at $19.55 per share on Friday morning, down $0.05 (-0.26%). Year-to-date, NGVC has gained 38.01%, versus a -4.61% rise in the benchmark S&P 500 index during the same period.

About the Author: Aditi Ganguly

Aditi is an experienced content developer and financial writer who is passionate about helping investors understand the do’s and don'ts of investing. She has a keen interest in the stock market and has a fundamental approach when analyzing equities. More...

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