Stock Analysis

Here's Why We Think United Natural Foods (NYSE:UNFI) Is Well Worth Watching

NYSE:UNFI
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It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. But the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses. While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.

If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in United Natural Foods (NYSE:UNFI). Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.

Check out our latest analysis for United Natural Foods

How Fast Is United Natural Foods Growing Its Earnings Per Share?

United Natural Foods has undergone a massive growth in earnings per share over the last three years. So much so that this three year growth rate wouldn't be a fair assessment of the company's future. As a result, we'll zoom in on growth over the last year, instead. United Natural Foods' EPS shot up from US$2.55 to US$4.25; a result that's bound to keep shareholders happy. That's a fantastic gain of 67%.

One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. United Natural Foods maintained stable EBIT margins over the last year, all while growing revenue 7.3% to US$29b. That's encouraging news for the company!

In the chart below, you can see how the company has grown earnings and revenue, over time. To see the actual numbers, click on the chart.

earnings-and-revenue-history
NYSE:UNFI Earnings and Revenue History October 24th 2022

The trick, as an investor, is to find companies that are going to perform well in the future, not just in the past. While crystal balls don't exist, you can check our visualization of consensus analyst forecasts for United Natural Foods' future EPS 100% free.

Are United Natural Foods Insiders Aligned With All Shareholders?

It should give investors a sense of security owning shares in a company if insiders also own shares, creating a close alignment their interests. Shareholders will be pleased by the fact that insiders own United Natural Foods shares worth a considerable sum. To be specific, they have US$38m worth of shares. That shows significant buy-in, and may indicate conviction in the business strategy. Even though that's only about 1.6% of the company, it's enough money to indicate alignment between the leaders of the business and ordinary shareholders.

Does United Natural Foods Deserve A Spot On Your Watchlist?

If you believe that share price follows earnings per share you should definitely be delving further into United Natural Foods' strong EPS growth. This EPS growth rate is something the company should be proud of, and so it's no surprise that insiders are holding on to a considerable chunk of shares. On the balance of its merits, solid EPS growth and company insiders who are aligned with the shareholders would indicate a business that is worthy of further research. You still need to take note of risks, for example - United Natural Foods has 3 warning signs (and 1 which is concerning) we think you should know about.

Although United Natural Foods certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see insider buying, then this free list of growing companies that insiders are buying, could be exactly what you're looking for.

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

Valuation is complex, but we're helping make it simple.

Find out whether United Natural Foods is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.