United Natural Foods Is Too Risky Despite An Ultra-Low Looking Valuation

Summary

• UNFI's turnaround efforts are showing progress, but the stock's recent run has priced in much of the recovery potential.
• The company's high debt load—most of it variable rate—remains a significant risk, especially if interest rates stay elevated.
• Despite margin improvements, long-term margin compression, and fierce competition limit upside; valuation metrics suggest little margin of safety.
• Given the fair-to-overvalued stock price and risky balance sheet, I rate UNFI a sell despite management's positive steps.

Tara Moore

Intro

United Natural Foods (NYSE:UNFI) is a leading distributor of grocery (organic and conventional) as well as non-food products (like beauty) and support services provider to retailers in the United States and Canada. The company has more than 30,000 customer locations

Analyst’s Disclosure:I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.