United Natural Foods' Margin Growth Might Be Underestimated

Eric Novinson266 FollowersFollow5ShareSavePlay(9min)CommentsSummaryUnited Natural Foods is undervalued, with even small margin improvements poised to drive significant earnings growth.UNFI is optimizing its distribution network, exiting low-margin segments, and expanding higher-margin services like fintech and digital marketing.Despite recent revenue declines, UNFI’s gross margin is improving, and management is actively buying back stock and reducing debt.My price target for UNFI is $46.24, 23% above current levels, supported by low P/FCF and incremental margin expansion. halbergman/E+ via Getty Images United Natural Foods (UNFI) could be worth a lot more if it can become a little bit more profitable. This grocery distributor has very low margins, so even incremental improvements could have a big impact onThis article was written byEric Novinson266 FollowersFollowI am a freelance business writer. I formerly wrote articles for the Motley Fool Blogging Network, where I won several editor's choice awards. After that, I wrote articles for the main Motley Fool site. I typically focus on restaurants, retailers, and food manufacturers, considering both growth opportunities and valuation metrics. I usually look for long term investment opportunities and plan to hold stocks for several years.Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.