United Natural Foods Inc. (UNFI) is a wholesale distributor of natural, organic and specialty foods and nonfood products across North America. The company's products consist of national, regional and private label brands grouped into grocery and general merchandise, produce, perishables and frozen foods, and personal care items.
The company has been benefiting from increased e-commerce solutions that have been generating more revenue. For instance, UNFI recently launched Community Marketplace — a business-to-business digital e-commerce solution. This platform is designed for emerging brands, to help them expand distribution with UNFI’s customers.
The company only had $39 million in cash as of the end of April, but that is still more than its short-term debt of $24 million. However, its net profit margin is flat and its debt-to-equity ratio is high at 2.8.
Sales growth has been strong, with an average growth rate of 26.5% over the past five years. But analysts forecast 1.3% year over year growth in the current quarter. Earnings are expected to fall 24.5% year over year this quarter.
The stock appears undervalued with a trailing P/E of 13.64 and a forward P/E of 9.8. The stock had been trending up the first three months of the year, but has shown mixed momentum over the last three, as shown in the chart below.
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Take a look at the 1-year chart of UNFI below with added notations:
At the beginning 0f 2021, UNFI had stalled at the $32 mark a few times before finally breaking above it, and after that break the same $32 level has become key support (green). UNFI looks like it may be falling to that support level once again.
A break of $32 could mean much lower prices for the stock. A trader could enter a short position if the stock breaks under the support level.
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UNFI shares were unchanged in premarket trading Wednesday. Year-to-date, UNFI has gained 112.27%, versus a 17.73% rise in the benchmark S&P 500 index during the same period.
About the Author: Christian Tharp
I am an expert stock market coach having helped over 4000 beginner and advanced traders & investors from around the world take control of their financial futures. I also write stock market related articles for the Adam Mesh Trading Group and Yolo Publishing.
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