Investopedia: United Natural Foods Has To Spend Money To Make Money

While there have certainly been some pullbacks along the way, including a nearly 10% decline after fourth quarter earnings, United Natural Foods (Nasdaq:UNFI) has, by and large, basked in the love of growth stock investors. And not without some good reasons - United Natural has delivered excellent growth and market share gains, and has recently shown some solid margin improvements. I still think a key fundamental question remains, however, and that is whether investors are properly discounting what the company needs to spend on capex to maintain its growth rate into the near future.

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Investopedia: Premium Foods Not Driving Premium Cash Flow For United Natural

For most of the last three years, shares of United Natural Foods (Nasdaq:UNFI) have pretty consistently flummoxed value-oriented investors. While the margins aren't great for this organic food distributor (nor for food distribution in general), revenue and profit growth has continued to support a pretty healthy valuation and a rising stock price. The market may eventually realize that it's not "different this time" and that the fundamentals of United Natural's business cannot support this valuation, but that's been a money-losing thesis for skeptics so far.

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Investopedia: UNFI - Everything Is Right But The Price

Investors often look to food stocks for their safety and perceived resistance to tough times; even though consumers are pinching pennies, companies like McDonald's (NYSE:MCD), Sysco (NYSE:SYY) and Whole Foods Market (NYSE:WFM) are still selling food. So, when you find a company that offers a growth kicker to what is often a staid industry, it's no surprise that investors take notice. Still, so much is already expected from United Natural Foods (Nasdaq:UNFI) that it seems hard to imagine how the stock will deliver above-average gains, to long-term investors. 


Business is Still Good 
As UNFI's fiscal first quarter results show the company is still delivering good growth. Revenue rose almost 16% on reported basis, with organic growth of just a little under 14%. Food inflation was below 4%; an interesting result, given the numbers reported by Sysco about a month ago, and granting that they operate quite different businesses.


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