UNFI - Embedded Expectations Analysis - 2018 07 11
United Natural Foods, Inc. (UNFI:USA) currently trades around historical lows relative to UAFRS-based (Uniform) Earnings, with a 13.6x Uniform P/E. At these levels, the market has bearish expectations for the firm, and management has concerns about guidance, operational efficiency, and marginsSpecifically, management may be exaggerating demand for better-for-you products, and might be downplaying concerns about declines in gross margin. Moreover, they may be concerned about their ability to meet bottom line guidance, and might be exaggerating their focus on returns on their projects. Additionally, they might have concerns about their ability to maintain growth in supernatural sales as well as their ability to improve free cash flow going forward. Finally, they might have concerns about CapEx value, and their ability to improve operational efficiencies
United Natural Foods is a distributor of natural, organic, specialty, produce, and grocery and non-food products, and provider of support services in the United States and Canada. The company's selection of products includes nationally advertised brand name and private-label products, including grocery, general merchandise, home, health and beauty care, and pharmacy, which are sold through its Wholesale segment to wholesale customers and through its subsidiary, SUPERVALU INC.'s-operated retail stores to shoppers. The company provides marketing services for its customers and suppliers, including consumer and trade marketing programs, as well as programs to support suppliers in understanding its markets.
In 2009, just as the dust was settling from the last major equity and credit market crises, we launched a boutique research firm with the intention of breaking Wall Street’s biases and broken incentives:
- GAAP and IFRS have failed to provide rules for reliable financial statement reporting
- Stock analyst recommendations are not grounded in disciplined financial analysis
- Credit agencies have been set up to grossly fail in their responsibilities to investors and the public markets
- Utter lack of willingness of major research firms to employ the the most advanced forensic analysis available
We sought to provide investors and company analysts with a source of information that changed all that.
Many years later, our business model remains because little has changed on Wall Street.
- Corporate credit ratings remain years behind the fundamental underpinnings of company performance
- Stock analysts continue to make recommendations with deeply inherent biases
- Research firms have failed to break down the walls between credit, equity, and macroeconomic research
- The governing accounting bodies have created more leeway for mis-estimates and mis-classifications as financials have become unwieldy and overwhelming
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