Chalk up another fine quarter for United Natural Foods
After all, Wild Oats Markets
All-important margins, however, were more of mixed bag. Operating margins increased to 3.5% (up from 3.2% last year), and the company sees 3.8% as a reasonable level for the future. It's great to see margins improving, but even embattled Kroger
So, too, does the fact that Whole FoodsMarket
All that having been said, United Natural Foods is executing and is, perhaps more than anything, a question of valuation. The company is free cash flow (FCF) positive and expects to earn $1.46 to $1.52 a share for full-year 2004 (ending July 31). That puts the stock, which trades today near its 52-week high, at about 34 times forward earnings.
On the one hand, that's a bit rich. On the other hand, it reflects the positive impacts of the Wild Oats deal, the margin improvement, and the growing popularity of organic foods. Investors looking to participate in this growing trend, but who are hesitant to buy the supermarkets, might consider United Natural Foods a healthy (and growing) alternative.
Fool contributor W.D. Crotty does not own stock in any of the companies mentioned. If you want to discuss United Natural Foods with other investors, join in on the conversation at The Motley Fool's discussion boards.