Did Vitamin Shoppe Inc (VSI)’s Stock Not Follow General Nutrition Guidelines?

The stock is up over 420% in the past five years, and because it sells products at premium prices, its margins crush competing grocers like The Kroger Co. (NYSE:KR) and Safeway Inc. (NYSE:SWY) (4.69% vs. 1.60% and 1.19%, respectively).

Revenue last quarter was about $3 billion which is 10 times less than that of The Kroger Co. (NYSE:KR). Interestingly, net income was $142 million vs. Kroger’s $481 million last quarter, and this only supports the fact that margins and locations matter greatly. Whole Foods has a lot of potential with organic food sales setting new records annually and the fact that their store count can go up much more in the near future.

VSI Total Return Price data by YCharts

Oversold?

At first glance of the stock, Vitamin Shoppe looks to be in trouble. It has gone the opposite direction from its competitor GNC and another nutritional play – Whole Foods. However, if you look at the big picture, Vitamin Shoppe may be greatly oversold as its story hasn’t changed at all.

Online sales for Vitamin Shoppe and GNC last quarter increased 16.1% and 17.4%, respectively. This could hint at the possibility that Vitamin Shoppe doesn’t need the thousands of locations that GNC has currently. This could foreshadow a future where online sales dominate the supplement industry and actual brick and mortar locations will become more of a burden for companies like GNC.

In the end, all 3 nutritional-related companies should have trended together this year. The fact that Vitamin Shoppe separated from the pack could make it a great buying opportunity.

Michael Carter has no position in any stocks mentioned. The Motley Fool recommends Whole Foods Market. The Motley Fool owns shares of Whole Foods Market.

The article Did Vitamin Shoppe’s Stock Not Follow General Nutrition Guidelines? originally appeared on Fool.com and is written by Michael Carter.

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

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