Is United Natural Foods (UNFI) Pricing Reflect Its Recent 25% One Year Share Price Gain

• If you are wondering whether United Natural Foods at around US$40.09 is offering fair value or a potential bargain, you are in the right place for a clear valuation focused breakdown.
• The stock has recently posted returns of 3.5% over the last week, 18.8% over the last month, 20.0% year to date and 25.4% over the past year, with a 3 year return of a 5.4% decline and a 5 year return of 47.7%.
• Recent coverage of United Natural Foods has focused on how the business is positioned within the US consumer retailing sector and how investors are reassessing its long term prospects in that context. This backdrop helps frame the recent share price moves and sets up an important question around what a reasonable valuation looks like for the stock today.
• On our simple 6 point valuation checklist, United Natural Foods scores a 5 out of 6. This suggests there is more to unpack when you compare different methods such as DCF, multiples and asset based approaches. We will also come back at the end of the article to a broader way of thinking about valuation that ties all of this together.

United Natural Foods delivered 25.4% returns over the last year. See how this stacks up to the rest of the Consumer Retailing industry.

Approach 1: United Natural Foods Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow, or DCF, model takes projected future cash flows and discounts them back to today using a required rate of return, giving an estimate of what the business could be worth right now.

For United Natural Foods, the model used is a 2 Stage Free Cash Flow to Equity approach, based on cash flow projections. The latest twelve month Free Cash Flow is about $253.7 million. Analysts have provided Free Cash Flow estimates for several years ahead, and Simply Wall St then extrapolates this path further. On these projections, Free Cash Flow in 2030 is modeled at $557 million, with intermediate annual figures such as $394.4 million in 2026 and $681.97 million in 2035, all in dollars and mostly in the hundreds of millions.

When all those future cash flows are discounted back to today, the DCF output suggests an intrinsic value of about $132.50 per share. Against a current share price around $40.09, this implies the stock is 69.7% undervalued on this model.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests United Natural Foods is undervalued by 69.7%. Track this in your watchlist or portfolio, or discover 51 more high quality undervalued stocks.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for United Natural Foods.

Approach 2: United Natural Foods Price vs Sales

For companies where revenue is a key driver and earnings can be more volatile, the P/S ratio is often a useful way to think about value because it compares what you are paying to the sales the business is generating.

In general, higher growth expectations and lower perceived risk tend to support a higher “normal” or “fair” valuation multiple, while slower growth and higher risk usually align with a lower multiple.

United Natural Foods currently trades on a P/S of 0.08x. This sits below the Consumer Retailing industry average P/S of 0.43x and also below the peer group average of 0.79x. On the surface, that gap might make the stock look inexpensive relative to its sector and peers.

Simply Wall St’s Fair Ratio for United Natural Foods is 0.18x. This is a proprietary estimate of what a reasonable P/S might be, based on factors such as earnings growth, profit margins, industry, market capitalization and company specific risks. Because it adjusts for these elements, the Fair Ratio can be more tailored than a simple comparison with peers or the broad industry.

Comparing the Fair Ratio of 0.18x with the actual P/S of 0.08x indicates that the shares are trading below that model-based estimate.

Result: UNDERVALUED

P/S ratios tell one story, but what if the real opportunity lies elsewhere? Start investing in legacies, not executives. Discover our 22 top founder-led companies.

Upgrade Your Decision Making: Choose your United Natural Foods Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives. This simply means spelling out your story for United Natural Foods, linking that story to specific assumptions for future revenue, earnings and margins, and then translating those assumptions into a fair value you can compare with today’s price.

On Simply Wall St’s Community page, Narratives are an easy tool that let you see how different stories translate into numbers, from a more cautious view that points to a Fair Value of US$35.00 to a more optimistic view closer to US$39.13. You can then use that side by side with the current share price to help you decide whether you see the stock as closer to a buy, a hold, or a sell case for your own situation.

Because Narratives update automatically when new information such as earnings, guidance or news is added to the platform, you are not just looking at a static price target. You are seeing how a living story for United Natural Foods flows through into revised forecasts and a refreshed Fair Value that you can test against your own expectations.

Do you think there's more to the story for United Natural Foods? Head over to our Community to see what others are saying!

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com