UNFI $UNFI stock gained 30% last week after "great" earnings. The company narrowly missed revenues but beat earnings expectations by 47%, mostly because of improvements on their margins. UNFI has already gained 800% since March 2020 and is today the largest position in my portfolio. What's next for UNFI?
UNFI is the largest wholesales distributor in North America with a focus on organic and natural foods with their largest customer being Wholefoods (owned by Amazon $AMZN ). UNFI acquired Supervalu in 2018 and now they have entered the retail business too. 2020 and 2021 were good years for UNFI because of the pandemic. But what about the future?
In 2022, we should not expect revenues and profits to go up by that much compared to 2021 since this was an exceptional year. But there's now a new catalyst on the company, inflation.
However, the stock price of UNFI has not been doing so well in recent years, only last year a recovery started. The main reason is because of the debt they took to acquire Supervalu and because of rising pension liabilities. It is not good but even in the worst-case scenario, UNFI will be able to pay their liabilities.
But there were also market inefficiencies, they were losing money on paper because of impairment of goodwill although, in reality, the cash flows were still positive. Moreover, at some point, 24% of the shares outstanding were shorted which lead to a short squeeze.
At the current price, I'll say that UNFI is still undervalued but I'm not going to buy more.
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