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United Natural Foods, Inc.

United Natural Foods, Inc. Covering Analyst: Matthew Miller Email: Miller24@uoregon.edu. Business Overview. Founded 1996 from merger of two regional distribution companies First nationwide distributor of natural, organic and specialty products First firm in U.S. certified by QAI.

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United Natural Foods, Inc.

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  1. United Natural Foods, Inc.

    Covering Analyst: Matthew Miller Email: Miller24@uoregon.edu
  2. Business Overview Founded 1996 from merger of two regional distribution companies First nationwide distributor of natural, organic and specialty products First firm in U.S. certified by QAI
  3. Scale of Operations U.S. & Canada 27,000 customers 26 distribution centers 65,000 SKU’s 4,800 suppliers
  4. Products as Percent of Revenue
  5. Wholesale Industry Revenue projected to decline by 1.5% in 2013 Low margins Competition from direct distribution
  6. Natural & Organic Products Industry Growing at about 10% per year Expected to continue at 9% or higher Growth driven by demand for healthy and environmentally sustainable products
  7. Comparables Growth Beta Margins Industry Similarities Market Capitalization
  8. Comparables Whole Foods Market – 30% Costco – 30% Core-Mark – 20% Hain Celestial – 10% Sysco – 10%
  9. Comparables Valuation
  10. DCF Analysis Revenue Model 4 segments Supernatural Conventional Natural Products Retailers Other Revenue growth driven by continued demand for healthy, safe & sustainable products
  11. Percent of Revenue by Segment 2012
  12. Revenue Mix Over Time
  13. Percent of Revenue by Segment 2018
  14. DCF Assumptions Cogs increasing as a % of revenue Gross margin decreasing SG & A decreasing as a % of revenue Operating margin expanding 9-12 bps
  15. DCF Valuation Implied price of DCF: $38.10 Overvalued by 27.42%
  16. DCF Valuation Possible reasons Beta Market Risk Premium
  17. Sensitivity Analysis of Beta
  18. Sensitivity Analysis of Market Risk Premium
  19. Implied Price
  20. Portfolio Position
  21. Note United Natural Foods reports 1st quarter earningsNov 30 Expected Revenue: $1.381 Bn
  22. Recommendation Based upon my DCF & comparables analysis, I found United Natural Food’s stock to be overvalued. Therefore, I recommend a sell for both the Tall Firs and Svigals portfolios.

  23. Questions?

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