Back in February, I had concerns that Natural Grocers by Vitamin Cottage (NYSE:NGVC)
(or "Natural Grocers") shares were running a little ahead of themselves
on hopes that the company was past the competitive pressures of new
store entries into key markets. The shares have fallen 18% since then,
as the company's respectable same-store sales growth has continued to
come in a little lower than sell-side expectations and concerns about
the economy and competition won't go away.
I believe there is a
credible argument to be made that Natural Grocers shares are
undervalued, but there is a lot of risk attached to the calculation. The
company will very likely continue to generate negative free cash flow
for three to four years, and the big improvements in free cash flow are
well down the line. Add to that the intense competition in the
natural/organic food space (arguably getting worse), and this is not
exactly a can't-miss prospect.
Read more here:
In A Fierce Food Retail Market, Natural Grocers Has To Perform Better
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