Dec. 4 at 6:33 PM
$UNFI The price reaction since earnings were released on Tuesday makes very little sense to me. Yes, revenue came in below consensus, but UNFI is a mid single digit growth business, even in a best case scenario. A flat revenue quarter YoY doesn't mean much. What matters are margins, and the margin trajectory is currently very strong.
- EBITDA margin is up 70% (2.13% vs 1.25%) since bottoming in mid 2023.
Yes, these are razor thin margins, but UNFI is a
$30B revenue business with only 60M shares in circulation. That's
$500/share in revenue for a stock currently trading at
$33. Any margin gains flow through to EPS with incredible leverage.
- Adjusted EPS has flipped from -
$0.25 to +0.56 in that same period since mid 2023.
If UNFI can achieve the low end of their historical pre-merger EBITDA (3-4%), annual EPS will be
$5.00+. No revenue growth needed.
