What Investors Need to Know About This Outperforming Food Stock

UNFI appoints their first Chief Corporate Affairs Officer

Jan 26, 2022 at 11:55 AM
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  • United Natural Foods, Inc. (NYSE:UNFI) is one of the largest wholesale distributors delivering food to people throughout the United States and Canada. UNFI offers a wide variety of products to customer locations throughout North America including natural product superstores, independent retailers, conventional supermarket chains, ecommerce retailers, and food service customers. At last check, UNFI was trading up 1.4% at $37.51.

On Jan. 10, United Natural Foods announced that Matt Echols has been appointed to the newly created position of Chief Corporate Affairs Officer with oversight of UNFI’s Corporate Communications and Engagement, Public Policy, Government Relations, and Environmental, Social and Governance (ESG) teams. Echols will officially join UNFI on March 1.

United Natural Foods stock has increased about 37% year-over-year and is up 52% since touching its 52-week low of $24.34 last February. However, shares of UNFI have already dropped 25% year-to-date and shed 36% since hitting its five-year high of $57.89 in early December.

Moreover, the whole food delivery company’s overall revenue and net income growth rates have been positive despite UNFI struggling to find consistency on an annual basis, most notably in the bottom-line. In addition, United Natural Foods stock has a very intriguing valuation with a price-earnings ratio of 10.03 and a price-sales ratio of 0.12.

However, UNFI’s balance sheet is very weak with just $46 million in cash. It also has $3.72 billion in total debt, which is 73% higher than its market cap of $2.15 billion, indicating relatively weak fundamentals. Overall, the risk-reward potential with United Natural Foods stock is simply unattractive despite UNFI’s low valuation.

Short interest has been dropping off, down 22% during the past two reporting periods, and now accounts for 3.4% of the stock's total available float. At the equity's average pace of daily trading, it would take short sellers more than three days to buy back their bearish bets.

In terms of analyst sentiment, those following the food giant are leaning pessimistic. Specifically, five of the eight in coverage sport a tepid "hold" or worse recommendation, leaving plenty of room for upgrades moving forward.

 

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