United Natural Foods (Nasdaq:UNFI)
offers an interesting test-case for two conflicting realities of Wall
Street. On one hand, investors frequently pay up for above-average
growth stories, and particularly those with strong market share and/or
barriers to entry. On the other hand, margins are an under-appreciated
driver of investment performance and investors seldom pay high multiples
for weak margin stories. While these shares have underperformed in a
hot market for packaged food stocks, the market continues to assign a
pretty rich value to this natural foods distribution company.
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