On Wednesday, United Natural Foods Inc (NYSE: NYSE:UNFI) shares saw price target raised to $32.00 from $23.00 by BMO Capital, while the firm kept a Market Perform rating on the stock.
This adjustment comes after UNFI reported a higher than expected adjusted EBITDA of $499 million, which was attributed to new business wins and operating expense leverage. According to InvestingPro data, the stock has shown remarkable momentum with a 109% price return over the past six months.
The company's management has revised the lower end of their Fiscal Year 2025 (F25) EBITDA guidance upwards. This revision is seen as a reasonable response to the increased visibility into the factors contributing to more stable EBITDA trends.
With a current ratio of 1.48, InvestingPro analysis shows the company maintains strong liquidity with assets exceeding short-term obligations. In the near term, United Natural Foods is expected to benefit from a reduction in distribution center (DC) square footage by 3-4%.
Despite the positive short-term outlook, BMO Capital maintains its Market Perform rating due to lingering concerns over the company's long-term revenue growth. InvestingPro analysis indicates the stock is currently trading above its Fair Value, with additional insights available in the comprehensive Pro Research Report.
The new price target of $32 is based on approximately 6.5 times the enterprise value to EBITDA ratio (EV/EBITDA), which includes the estimated proceeds from the potential sales of distribution centers. This valuation aligns with UNFI's pre-pandemic average.
The report by BMO Capital suggests that while immediate financial indicators appear favorable for UNFI, the firm's cautious stance reflects uncertainties in the company's future top-line growth. The price target increase reflects the current financial performance and near-term expectations, balanced against a backdrop of long-term considerations.
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