Is United Natural Foods Headed for a Breakdown?

United Natural Foods Inc. (UNFI) is a wholesale distributor of natural, organic and specialty foods and nonfood products across North America. The company’s products consist of national, regional and private label brands grouped into grocery and general merchandise, produce, perishables and frozen foods, and personal care items…

United Natural Foods Inc. (UNFI) has been benefiting from increased e-commerce solutions that have been generating more revenue. For instance, UNFI recently launched Community Marketplace — a business-to-business digital e-commerce solution. This platform is designed for emerging brands, to help them expand distribution with UNFI’s customers.

The company only had $39 million in cash as of the end of April, but that is still more than its short-term debt of $24 million. However, its net profit margin is flat and its debt-to-equity ratio is high at 2.8.

Sales growth has been strong, with an average growth rate of 26.5% over the past five years. But analysts forecast 1.3% year over year growth in the current quarter. Earnings are expected to fall 24.5% year over year this quarter.

The stock appears undervalued with a trailing P/E of 13.64 and a forward P/E of 9.8. The stock had been trending up the first three months of the year, but has shown mixed momentum over the last three, as shown in the chart below.

Take a look at the 1-year chart of UNFI below with added notations…

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