A company is a legal entity that is comprised of an association of people that sells good and services to make money. Companies are structured in different ways depending on the business it deals with (Khodamipour, Golestani & Khorrami 2014). The ownership can be of one individual or a group of people. All the companies in a given state must follow the mandatory formation process before its operations. This is a report on United Natural Food Incorporated Company situated in Canada and the United States.
United Natural Food, Incorporated (UNFI) it’s a wholesale grocery industry company based in Canada and United States that was founded in 1978 (Setyowati, Titisari & Dewi 2018). It deals with distribution of natural and organic foods, specialty foods and other related products. Its primary customers are the grocery and wholesale food market vendors. The major competitor to United Natural Food Incorporated is KeHE Distributors, LLC (Kehe), which owns Tree of Life Distribution, Inc. Other competitors include; Unified Grocers, Nash Finch Company, Natures Best, C&S Wholesale Grocers, to mention just a few. Regardless of having such strong rivals, UNFI remains to dominate in the world of natural and organic products. UNFI Company is the largest distributor of natural and organic foods and has the most significant number of customers. It has flexible prices, products for every category and the stakeholders focus much on what the customers want (Morozova & Safonova 2015). Its investment in technological advancements makes it stand out. The main aim of this investment is to improve warehouse management, transportation, and advertisement of its products.
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UNFI profitability has not been the best this is because of the increased number of players in the industry. A year from year its financial ratios have not been going higher as expected (Setyowati et al., 2018). The gross margin has been 15% for the last four consecutive years. The operating margin has dropped from 3% to 2%. Besides, the profit margin has been between the range of 2% and 1% for the four years. The company's net income in two quarter 2018 has declined year on year by -15.64% faster than the decline experienced by its competitors thus reporting lower profitability than its competitors (Khodamipour et al., 2014). Besides, UNFI liquidity is very high to mean that its current assets allow it to be in a sound position to handle any of its debts. This is evident in the current liquidity ratios. The current ratio has retained a 256% for the last four consecutive years while the quick ratio though having dropped yearly it has not gone below 90% since 2015 up to now.
This efficiency of the Company is results from its strengths that are seen in multiple areas. For instance, its revenue growth, a very stable financial position with reasonable debt levels, valuation levels that are reasonable, notable return on equity, and solid stock price performance. UNFI in fourth quarter 2018 has achieved a revenue increase of 10.73% year on year (Morozova & Safonova 2015). The company’s stock price currently is $23.60, and the close made previously was $23.63 making it have a market cap of $1Billion (Setyowati et al., 2018). UNFI’s current assets of $1.70 Billion cover the company’s total debt of $469 million. The earnings of the company cover the interest of its debt fully. The quarterly return on equity ratio on October 2017 was 10.02%, January 2018 10.34%, April 2018 11.24%.
The company’s solvency is very high because its return on assets increases annually. An example is from 2016 to 2018; it realized an ROA of 4.41%, 4.51% and 5.59% respectively (Siikanen, Kanniainen & Luoma 2017). The company is primarily aided by the debt leverage in improving its operations and services. However, my take on the debts is that UNFI should have fewer debts to avoid using its earnings to pay interest in the deficit but instead return the profits into the business.
One of the most important things that a shareholder who intends to invest in a company should know is how the company contributes to the risk and reward profile of his or her portfolio. UNFI is faced with two risks. Firstly, the company-specific risk which can be diversified by investing in other companies to reduce exposure to one particular stock (Siikanen et al., 2017). Second is the market risk; this arises from the macroeconomics factors which directly affect all the shares in the market. Thus it's not possible to diversify it away (Khodamipour et al., 2014). The market risk is likely to occur due to the increase of competition in the grocery industry. The stiff competition has an impact on the products pricing and even on some customers that will remain in the company.
The company has appropriate accounting practices. The maintenance of accurate bookkeeping is vital in any business organization. Accuracy in accounting makes sure that the profits and other financial statements are not misrepresented (Morozova & Safonova 2015). Violation of this ethic may lead to the loss of vast amounts of money. Accurate bookkeeping is beneficial for financial reports to show clearly the progress of the company. The accounting practices have impacted the company's financial analysis for all financial reports are calculated and prepared after a specifically given duration (Siikanen et al., 2017). This helps the stakeholders in knowing the progress of the company.
Given a chance, I would wholeheartedly invest in UNFI. This is because the company has got a robust free cash flow that provides resources that aid in the expansion of the company into new projects. The company also has got good product innovation thus it develops new products that other companies do not have (Morozova & Safonova 2015). To add on, the company has got very reliable suppliers meaning at no given time will it lacks products to distribute. It has strong networking strategy thus enabling it to reach the potential market and also its performance in new markets is excellence hence increasing sales (Siikanen et al., 2017). Following this it’s, therefore, a good idea to invest with UNFI Company for it can give good returns with no much time.
UNFI as one of the leading companies in the wholesale grocery industry has numerous strengths that help it to survive in the marketplace. They include; strong distribution network, strong free cash flow, new product tracking, reliable suppliers amongst others. The strengths also help the company in penetrating to new markets (Morozova & Safonova 2015). However, like any other company, UNFI has got areas that it needs to improve on to make its operations more efficient. For instance, it should fill up the product range gaps, improve on its marketing strategy, forecast well on product demand so as not to give room to competitors and also it should improve on its investment in research and development which is below that of the other players in the same industry.
References
Khodamipour, A., Golestani, S., & Khorrami, M. (2014). The relationship between liquidity and the company size with company value in companies listed on the Tehran Stock Exchange. European Online Journal of Natural and Social Sciences: Proceedings , 2 (3 (s)), pp-1210.
Morozova, T., & Safonova, E. (2015). Forecasting and modeling in the management of company value in the financial statements. Scope Academic House B&M Publishing .
Siikanen, M., Kanniainen, J., & Luoma, A. (2017). What drives the sensitivity of limit order books to company announcement arrivals?. Economics Letters , 159 , 65-68.
Setyowati, E., Titisari, K. H., & Dewi, R. R. (2018, August). The Effect of Profitability, Leverage, Liquidity, and the Company Size on Aggressiveness Tax the Sector Companies Consumer Goods Industry That Listed On The Indonesia Stock Exchange Year 2014-2016 . In Proceeding Ictess (Internasional Conference on Technology, Education and Social Sciences) .
