This natural food grocer is off nearly 40% from its 52-week high just six months ago, but it’s still one of the best bets on the fast-growing organic food trend.

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Shares of Whole Foods Market (NASDAQ: WFM) have now tumbled close to 12% over the last month and are off some 40% from their 52-week high in February.

With the organic grocery stock trading around $35 a share, it’s now at multi-year lows. Sentiment surrounding the company was crushed after a weak quarterly earnings report, with same-store sales continuing to slow.

Figuring out pricing is a must for the company. Same-store sales are declining because the company can’t figure out how to keep customers coming back, especially when the likes of Wal-Mart (NYSE: WMT) and Kroger (NYSE: KR) are now offering organic foods for much cheaper.

The worry of larger grocers like Kroger taking market share from natural grocers is very real. At the same time, this isn’t anything new. Recall last summer, we saw a large selloff in Whole Foods’ stock with the threat of rising competition, only to see the stock rally from $40 to $55 a share in just a few months.

Since then, Whole Foods actually appears to have a more sound strategy for addressing any competition that comes its way. Previously, the company was just going to lower prices – ultimately compressing its margins – to stay competitive. Since then it’s announced a completely new brand of stores to tackle the lower-priced organics market, dubbed “365 by Whole Foods Market.”

This concept is expected to be akin to farm-to-table offerings and will compete more with Trader Joe’s from a pricing standpoint. Five such stores are expected to be rolled out this year, and an acceleration of square footage and store growth will help grow company-wide sales over the interim.

Its nationwide marketing campaign should help get the message out about lower-priced products and its new store format. Granted, this will boost marketing spend, but it’s a near-term cost to capture customers that will hopefully become recurring shoppers. And its planned home-delivery service is a long-term strategy that could help the company gain and retain even more customers.

Just last month I did a roundup of the major grocers, noting that much of the market was starting to write off the specialty and natural foods players. At the time, The Fresh Market (NASDAQ: TFM) was the most appealing company in the industry. However, with the selloff in Whole Foods, the valuation has made the story there very compelling.

Kroger shares are up a whopping 60% over the last year, while Whole Foods is down 6%. But for the first time ever, Whole Foods is now trading at a cheaper valuation than Kroger. Whole Foods trades at an enterprise value-to-EBITDA (earnings before interest, taxes, depreciation and amortization) multiple of 8.8, while Kroger is at 9.3.

And what’s more, Whole Foods’ return on invested capital still remains at an impressive 15.5%, which is about 40% higher than Kroger’s. Being in the premium natural foods space, Whole Foods enjoys a profit margin that’s double that of Kroger.

Then there’s the dividend. Whole Foods dividend yield is now up to 1.4%, with Kroger’s still sub-1%.

The natural food segment is still growing fast enough for Whole Foods to succeed even if it doesn’t recapture some of its lost market share. But it could easily start to make headway with market share gains by lowering produce prices to drive traffic, as well as by becoming more aggressive with its marketing and the 365 by Whole Foods Market rollout.

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Published by Wyatt Investment Research at