Flowers Foods (NYSE:FLO) delivered earnings that were three cents better than analyst expectations along with revenue that was $40 million higher than expected. Investors barely reacted to the news. With its stock up 72% in the last year, it's had a very good run. The question now is whether it has anything left in the tank.

Is its stock worth buying at this point? I'll have a look.

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First Quarter Results
In February, Flowers completed its $50-million trademark acquisition of Grupo Bimbo’s (OTC:GRBMF) Sara Lee and Earthgrains brands in the state of California. Last July, it acquired Lepage Bakeries for $382 million. The Maine baker sells bread in the Northeast. I mention these two acquisitions because they accounted for 770 basis points of its 25.9% increase in revenue in Q1. On the earnings front, it saw EBIT, excluding $51.3 million for a bargain purchase gain related to the Grupo Bimbo deal, increase by 58% to $152.5 million. Most notably, its warehouse sales, which account for just 18% of its overall revenue, grew by 29.5% in the first quarter while its direct store delivery (DSD) segment generated a 15.7% increase in revenue excluding acquisitions. It's no wonder CEO George Deese said, "we believe the results we reported today reflect the best performance in the company's history … This is an exciting time for Flowers Foods as we focus on integrating LePage bakeries in the Northeast and Sara Lee in California, while maintaining the gains we have achieved in markets throughout the country in recent months …"

SEE: Analyzing An Acquisition Announcement

The baking industry continues to consolidate and Flowers Foods is leading that charge. Back in 2000 there were as many as eight major players in the fresh baking industry in the US. Thirteen years later there are just three: Grupo Bimbo, Flowers Foods and Pepperidge Farm, which is a division of Campbell Soup (NYSE:CPB). Since 2004, Flowers Foods has made nine acquisitions for $871 million. It made another big move in January when it bid for some of the brands of bankrupt Hostess Brands. Successful in its $360 million bid, it acquired five brands, 20 closed bakeries and 38 depots. Iconic in nature, the purchase of Wonder Bread further strengthens its position in the marketplace. Before Hostess closed its doors in November of last year, it held 6.3% of the bakery business. With it gone, all three of the major players have taken market share including Flowers Foods, which gained 150 basis points in the first two months of 2013. By the end of June its brands should be available to more than 77% of the U.S. population. Once considered a regional player … no longer.

Profitable Growth
What makes Flowers Foods so special is that its earnings have grown faster than sales over the past decade indicating an efficiency very few can match. Since 2002, its 10-year compound annual growth rate for revenue is 8.65%. Meanwhile over the same 10 years its EBITDA growth rate was 10.44%, 179 basis points higher. It's no wonder then that its stock has achieved an annualized total return over the last decade of 20.7%, almost three times greater the S&P 500. Long-term it wants to grow net sales between 5% and 10% annually, an EBITDA margin of as high as 13% and earnings per share growth in double digits. Given its track record I don't think it will be a problem.

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I'm not going to sugar coat this--Flowers Foods isn't a cheap stock. By any valuation metric you want to look at, it's off the charts. When compared to its peers or even the S&P 500, with the exception of price-to-sales, it's expensive. That said, you have to admire a stock that's had just one losing year out of the past 11. Especially when you consider that in the year it was down (2006) its total return was negative by less than 1%. It's outperformed its peers in eight of 11 years and the index in nine of 11. It's possible that FLO will now revert to the mean and experience several years of underperformance. Possible--but not likely.

Bottom Line
Flowers Foods has proven to be very good at integrating acquisitions. The purchase of some of Hostess' brands brings it closer to national distribution. In January I argued that Flowers Foods was the perfect company to acquire Wonder Bread; a far better fit than Walmart (NYSE:WMT) or private equity

If you can afford to hold its stock for 3-5 years, I wouldn't have a problem buying its stock. However, if you want results in months and not years, this probably isn't your best option.  

At the time of writing, Will Ashworth did not own any shares in any company mentioned in this article.