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SpartanNash: At 4.7x-4.9x EBITDA, And Amazon Is In

Apr. 09, 2021 4:00 AM ETSpartanNash Company (SPTN)10 Comments
Lisbon Stock Picks profile picture
Lisbon Stock Picks


  • SpartanNash Company distributes and retails grocery products.
  • Net earnings increased from $5.7 million in 2019 to $75 million in 2020. Net income grew by close to 1,200% y/y.
  • Amazon owns close to 2.5% of the company’s total share count. Both companies signed a commercial agreement.
  • With the food industry trading at median EV/EBITDA of 6x-7.8x, I believe that there is an upside potential in the stock price.
  • Institutional money managers Truist Financial Corp., the Canada Pension Plan, and Jane Street are among the company’s institutional investors.

SpartanNash (NASDAQ:SPTN) is undervalued compared to its industry peers. The company trades at 4.7x-4.9x adjusted EBITDA. Amazon (AMZN) recently acquired stock warrants, and insiders are not selling their stakes. The company has also paid a significant amount of its debt, and it reports long-term debt/EBITDA ratio of 2x. That's not all.

Notice that in the last year, EBITDA growth was more than 30% y/y, and sales growth stood at more than 10% y/y. In my view, if SpartanNash continues to do successful acquisitions, and more investors study the company's financials, the stock price will most likely increase.


SpartanNash Company distributes and retails grocery products. It operates via three segments: Food Distribution, Military, and Retail.

Source: Company's Website

In terms of operating earnings, the company's retail segment is responsible for more than 60% of the total earnings. Food distribution is also relevant. In 2020, food distribution accounted for close to 40% of the total operating earnings:

Source: 10-K

Both the food distribution market and the grocery retail market grow at a CAGR of less than 5.1%. Hence, I would expect the company's sales to grow at less than 5.1% in the near future:

The U.S. packaged food market size was valued at USD 996.56 billion in 2020 and is expected to expand at a compound annual growth rate (CAGR) of 4.1% from 2021 to 2028.

The global food and grocery retail market size was valued at USD 11.7 trillion in 2019 and is expected to grow at a compound annual growth rate (CAGR) of 5.0% from 2020 to 2027.

Source: Grand View Research

With that about future sales growth, investors will notice that the company reports sales growth of about 9-10% y/y. In my opinion, more than half of the company's sales growth comes from inorganic growth. Note that from 2005, the company's goodwill increased, meaning

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Lisbon Stock Picks profile picture
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Comments (10)

Dmitriy Kozin profile picture
@Lisbon Stock Picks "Amazon Bought Warrants Of SpartanNash" and "Amazon owns close to 2.5% of the company's total share count" - neither of these statements is true. Amazon got warrants for achieving specific purchase volumes. Neither they "own the shares" nor did they "buy warrants".

Overall, the growth last year was a direct result of COVID, which you didn't seem to mention even once 😱 SPTN's most important customer was Dollar General at 17% of revenue and they are shifting to self-distribution via their DG Fresh initiative. Arguably, SPTN's deal with Amazon is a double-edged sword and dilution that comes with warrants isn't particularly amazing (the strike price of warrants is lower than the current share price).

Their Military segment is a mess and keeps bleeding money. Their grocery distribution segment seemed to benefit from COVID much less than Retail segment and less than a competitor such as UNFI.

SPTN isn't in bad shape, but things aren't nearly as rosy as you portray.
Lisbon Stock Picks profile picture
@Dmitriy Kozin Check the 10-k, the warrants owned by Amazon are equivalent to 2.5% of the company's share count. If you use fully diluted share count ... Amazon owns 2.5% of the share count.
Dmitriy Kozin profile picture
@Lisbon Stock Picks They have to pay almost $18 per share to exercise the warrants. Until they do, they don't own any shares. If they pay, company gets money. So neither "Amazon Bought Warrants Of SpartanNash" nor "Amazon owns close to 2.5% of the company's total share count".
Lisbon Stock Picks profile picture
@Dmitriy Kozin
The fully diluted shares outstanding count, on the other hand, includes diluting securities, such as warrants, capital notes or convertibles.
I think it would be more accurate in calculating enterprise value to include both deferred taxes and other long term liabilities (which the author excludes) in the calculation of net debt, putting the ratio about 6x.

I do agree with the author that the operating leverage potential here is some substantial.
Great value here. A sweet dividend while the shares move up to $25.
Thanks for the article. I bought some shares back in Feb and some more two weeks ago and now SPTN takes up the #6 spot on my small portfolio. The dividend was the real kicker for me.
Peret's investing corner profile picture
Good i formation, thanx. But I am checking the insider trading and for the most sites they report more selling than buying. It's a little bit messy, the reports vary a lot from one site to other.
@Peret's investing corner I believe all of those "purchases" are really stock options granted to executives. I don't see any recent "open-market" purchases from insiders. The AMZN warrants are also misportrayed by the author (I agree with Mr. Kozin's comments on the warrants). Yet, I remain long SPTN based on attractive valuation and consistent dividend growth.
Peret's investing corner profile picture
@dldr thanx a lot. It makes sense.
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