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Nicholas Kitonyi
Nicholas Kitonyi
Articles (409)  | Author's Website |

Should You Buy United Natural Foods After Pullback?

The stock is down 15%

December 09, 2020 | About:

Shares of United Natural Foods Inc. (NYSE:UNFI) fell more than 15% on Wednesday following the announcement of its most recent quarterly results. Before the opening bell, the food distribution company announced first-quarter 2021 revenue and earnings results that lagged Wall Street's expectations.

The share price of United Natural Foods is now up 78% this year following the pullback. It is currently trading at a forward 12-month price-earnings ratio of about 5.41, which suggests there could be room left to run heading into the new year.

Highlights from recent quarter

In its fiscal first quarter, United Natural Foods' earnings per share grew 325% to 51 cents, but still fell short of the consensus analyst estimates of 74 cents. The top line soared 10.85% to $6.67 billion, which again failed to meet expectations of $6.81 billion.

The company's adjusted Ebitda for the quarter ending Oct. 31 grew 30.6% to $159 million, up from $121.7 million in the year-ago quarter.

Chairman and CEO Steven L. Spinner said he was "pleased with the start to fiscal 2021 as UNFI leveraged strong sales growth into year-over-year expanded adjusted EBITDA margins for the third consecutive quarter."

The company also spent $50 million on a new distribution center in Allentown, Pennsylvania, which it said will be key in expanding its footprint in the greater New York metropolitan area.

United Natural Foods expects to post net sales in the range of $27 billion to $27.8 billion for the fiscal year ending July 31, 2021. Adjusted earnings per share are expected to come in at around $3.05 to $3.55 while the full-year adjusted Ebitda is estimated to range from $690 million to $730 million.

Valuation

From a valuation perspective, shares of United Natural Foods are trading at a forward 12-month price-earnings ratio of about 5.41. This is significantly better than close peer Sysco Corp.'s (NYSE:SYY) equivalent of 37.17. On the other hand, SpartanNash Co. (NASDAQ:SPTN) trades at a forward price-earnings ratio of 8.94, while Performance Food Grop Co.'s (NYSE:PFGC) is 39.06.

In summary, shares of United Natural Foods have pulled back after posting disappointing fiscal first-quarter results. This may have potentially created a window of opportunity for investors to buy given its price-forward earnings multiple relative to peers.

Disclosure: No positions in the stocks mentioned.

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About the author:

Nicholas Kitonyi
Nicholas is the founder of CAGR Value. He is a financial analyst with extensive experience in investment research and stock market analysis. His analysis has been featured on several research sites.

Nicholas has solid knowledge of both U.S. and European markets. His investment style is focused on undervalued plays and growth stocks. Nicholas classifies himself as a swing trader and likes to trade GBP/USD, gold and FTSE 100, among other liquid instruments.

Visit Nicholas Kitonyi's Website


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