Critical Review: Safeway (SWY) versus United Natural Foods (UNFI)

Safeway (NYSE: SWY) and United Natural Foods (NASDAQ:UNFI) are both mid-cap non-cyclical consumer goods & services companies, but which is the superior business? We will compare the two businesses based on the strength of their valuation, earnings, institutional ownership, risk, dividends, analyst recommendations and profitability.

Analyst Ratings

This is a breakdown of current recommendations for Safeway and United Natural Foods, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Safeway 0 0 0 0 N/A
United Natural Foods 5 8 6 0 2.05

United Natural Foods has a consensus target price of $43.94, indicating a potential downside of 7.34%. Given United Natural Foods’ higher probable upside, analysts plainly believe United Natural Foods is more favorable than Safeway.

Profitability

This table compares Safeway and United Natural Foods’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Safeway -0.26% -1.66% -0.69%
United Natural Foods 1.39% 8.04% 4.53%

Risk & Volatility

Safeway has a beta of 1.09, meaning that its share price is 9% more volatile than the S&P 500. Comparatively, United Natural Foods has a beta of 1.46, meaning that its share price is 46% more volatile than the S&P 500.

Earnings and Valuation

This table compares Safeway and United Natural Foods’ top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Safeway N/A N/A N/A $0.12 292.50
United Natural Foods $9.27 billion 0.26 $130.15 million $2.58 18.38

United Natural Foods has higher revenue and earnings than Safeway. United Natural Foods is trading at a lower price-to-earnings ratio than Safeway, indicating that it is currently the more affordable of the two stocks.

Summary

United Natural Foods beats Safeway on 8 of the 9 factors compared between the two stocks.

About Safeway

Safeway Inc., is an food and drug retail company. The Company owns and operates GroceryWorks.com Operating Company, LLC, an online grocery channel doing business under the names Safeway.com and Vons.com. Blackhawk, a majority-owned subsidiary of Safeway, is a prepaid payment network utilizing proprietary technology to offer gift cards, other prepaid products and payment services. Blackhawk’s payment network supports its three primary constituents: consumers who purchase the products and services Blackhawk offers, content providers who offer branded products that are redeemable for goods and services, and distribution partners who sell the products. Blackhawk’s product offerings include gift cards, prepaid telecom products and prepaid financial services products, including general purpose reloadable cards and Blackhawk’s reload network.

About United Natural Foods

United Natural Foods, Inc. is a distributor and retailer of natural, organic and specialty products. The Company’s segments include Wholesale and Other. The Wholesale segment is engaged in the national distribution of natural, organic and specialty foods, produce and related products in the United States and Canada. The Other segment includes a retail division, which engages in the sale of natural foods and related products to the general public through retail storefronts on the east coast of the United States; a manufacturing division, which engages in importing, roasting and packaging of nuts, seeds, dried fruit and snack items, and its branded product lines. Its operations consist of three operating divisions: Wholesale Division, Retail Division, and Manufacturing and Branded Products divisions. As of July 30, 2016, the Company had offered 100,000 natural, organic and specialty foods, and non-food products, consisting of national, regional and private-label brands.

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