UniFirst (UNF) Valuation Check After Recent Share Price Momentum And Fair Value Gap

Event driven look at UniFirst stock

UniFirst (UNF) shares recently closed at $193.61, drawing investor attention after a solid year in which the stock delivered a 15.2% total return and revenue reached $2.43b.

See our latest analysis for UniFirst.

The recent 90 day share price return of 17.57% and 30 day share price return of 6.84% suggest momentum has picked up again, even though the 3 year and 5 year total shareholder returns are slightly negative.

If UniFirst has you thinking about where consistent compounding could come from next, it may be worth scanning stable growth stocks screener (None results) to see how other steady growers compare.

With UniFirst trading at $193.61 against an analyst price target of $167.33 and an intrinsic value estimate that is lower than today’s price, the key question is whether there is still a buying opportunity here or whether the market is already accounting for stronger growth.

Most Popular Narrative Narrative: 17% Overvalued

With UniFirst last closing at $193.61 against a narrative fair value of about $165.50, the current price sits well above that implied level.

Significant investments in technology, specifically an ERP system, are anticipated to enhance efficiency, leading to improved profitability and reduced operational costs once fully implemented, which should impact net margins positively in the long run. Expansion of the distribution center in Owensboro, Kentucky, is expected to improve speed and efficiency in direct sales of uniforms, potentially driving revenue growth through enhanced operational capacity.

Read the complete narrative.

Curious what kind of steady revenue build, margin lift and future earnings multiple are baked into that fair value? The narrative pins everything on measured improvement, not breakneck growth. The key ingredients are carefully sized assumptions on sales, profitability and valuation that still justify a lower value than today’s price.

Result: Fair Value of $165.50 (OVERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, that measured improvement story could wobble if net wearer levels keep slipping, or if health care costs and price competition squeeze the 6% margin assumption.

Find out about the key risks to this UniFirst narrative.

Another way to look at UniFirst's value

Our fair value narrative points to UniFirst trading above an implied level of about $165.50, but the earnings multiple sends a more mixed signal. The current P/E of 23.6x sits just under the US Commercial Services average of 24.2x and well below peers at 36.2x.

At the same time, UniFirst trades above our fair ratio of 19.9x. This suggests the market is paying a premium to where the P/E could settle if it drifts toward that fair ratio. Is that extra multiple simply paying for quality and stability, or stretching what the earnings profile currently supports?

See what the numbers say about this price — find out in our valuation breakdown.

Build Your Own UniFirst Narrative

If you see the numbers differently or prefer to work from your own assumptions, you can build a fresh UniFirst story yourself in just a few minutes: Do it your way.

A good starting point is our analysis highlighting 3 key rewards investors are optimistic about regarding UniFirst.

Ready for more investment ideas?

If UniFirst has sharpened your focus, do not stop here. Broaden your watchlist now so you are not late to the next opportunity.

• Target bargain opportunities by checking out these 867 undervalued stocks based on cash flows that the model currently flags based on cash flows and fundamentals.
• Explore technology themes by scanning these 25 AI penny stocks that sit at the crossroads of artificial intelligence and long term structural trends.
• Consider income-focused strategies by reviewing these 14 dividend stocks with yields > 3% offering yields above 3% with supporting financial metrics.

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