Shoppers still are willing to pay a premium for this retailer's natural and organic foods, but its shares are in the bargain bin. By Bob Frick, Senior Editor July 30, 2008 Shares of Whole Foods Market are compelling for several reasons. But the best reason is smoky Andouille pork sausage and all that it represents. This is something I discovered recently while on the way home after picking up one of my kids. My wife called to ask me to buy hot dogs for the grill. At the time, I was equidistant from a Safeway and a Whole Foods Market. I chose the latter.Now, I've never filled a grocery cart at Whole Foods, but every now and then I'll brave the high prices to get something special. A bar of dark chocolate from Iceland, a case of Honest Tea, or maybe some fresh salsa or guacamole. In this case, it was 100% beef hot dogs for the family, and the Andouille (pronounced ahn-DWEE) sausages for me. I never even knew they existed, but the butcher said that if I liked spicy, I would love the Cajun delicacies. He guar-an-teed it. The hot dogs are made in the store and contain garlic, sage, paprika, allspice ... and probably the best parts of the pig, the remainder of which end up in Safeway hot dogs. Of course, that's not true, but you feel that way when you shop at a Whole Foods store. And you also feel that the patrons who do fill up their shopping carts would rather send their kids to public schools than give up the tasty, healthy goodness of Whole Foods products. This is not just my opinion. The facts show that even as the economy sours and Uncle Sam uses bailouts, duct tape and baling wire to hold together the nation's financial system, people continue to buy natural and organic foods at an increasing rate. Consumption of such foods in the U.S. was up 9.2% in a recent 30-day period, compared with the same period a year earlier, according to a report from broker William Blair & Company. The report went on to say that business at Whole Foods in the quarter that ended July 6 was in line with the previous quarter, during which sales at stores open at least 12 months climbed a robust 5.1%. Advertisement Yet investors have abandoned shares of Whole Foods faster than grocery shoppers would drop a brick of Velveeta if they could find such a thing in one of the stores (I recommend the Royal Bavarian Brie). From a high of $54 last October, the stock (symbol WFMI) closed July 30 at $22.04. Whole Foods has moved from a growth and momentum stock into the bargain bin. As that process has continued, investors have clearly overreacted. This is not to say the stock didn't deserve to come down in price. For starters, investors are fearful. A recent report from Zacks Equity Research, which obviously doesn't get the romance of Whole Foods, says "there are growing fears that the difficult macro environment may force consumers to choose cheaper alternatives to Whole Foods' higher-priced organic products." But again, the numbers don't bear that out. Then there's the financial factor, which is partly due to indigestion from Whole Foods' acquisition of Wild Oats in 2007. (There's also the flake factor, because at one point Whole Foods' chief executive officer dissed Wild Oats in anonymous Internet bulletin-board posts before making an offer to buy the company last year.) While sales have been climbing in the past two fiscal years and are expected to rise again in fiscal 2008, which ends in September, profits have been falling. Earnings per share dropped from $1.40 in the year that ended September 2006 to $1.31 in fiscal 2007, and they are expected to slide in at $1.16 per share this fiscal year, according to Thomson Financial. Advertisement But a big rebound is expected in fiscal 2009, when analysts see Whole Foods earning $1.56 a share. The stock sells at 14 times that estimate (and 19 times fiscal 2008 forecasts). A year ago, when Whole Foods was considered a growth company, the stock traded at roughly 30 times earnings. Imagine what will happen to the stock price when the market realizes its folly and begins considering Whole Foods a growth company again. Zacks gives the stock a six-month target price of $30. If you don't believe in the once and future king of fancy, healthy food, then Costco Wholesale (COST) is your play. But I'll take Whole Foods and put my faith in those well-heeled consumers who can't live without premium food at premium prices.