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Supervalu Rose after RBC Capital Reacted to Its Sell-Off

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Supervalu stock rose 4%

Supervalu (SVU) stock rose ~4% after RBC Capital analysts discussed its sell-off after the Amazon (AMZN) and Whole Foods (WFM) deal. As we discussed in the previous part, analysts William Kirk and Shiyao Ling stated that Amazon and Whole Foods are urban and won’t compete directly with Supervalu.

They reiterated Supervalu’s “outperform” rating and the $6 target price citing its strong wholesale pipeline (~$1 billion), synergies from the Unified deal, and rising customer footprint.

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Supervalu stock has fallen 32% this year

Supervalu’s stock market performance hasn’t been satisfactory this year. Currently, the company is trading at $3.17—down ~32% YTD (year-to-date). It’s trading ~80% below its 52-week high price.

Kroger (KR) has fallen 32%, while wholesalers United Natural Foods (UNFI) and Sysco (SYY) have fallen 25% and 10% YTD, respectively.

Organic and natural food grocers have done fairly well. Sprouts Farmers Market (SFM) and Whole Foods Market have risen 37% and 20%, respectively. Whole Foods rose 29% on June 16—the day that the Amazon acquisition was announced. Supervalu and Kroger fell 9.2% and 14.4% after the news.

Valuations

Supervalu continues to be the cheapest among its wholesaler and retailer peer group. The company is trading at 8.7x on a one-year forward price-to-earnings ratio. Kroger is trading at 11.6x, while Whole Foods is at 32x. United Natural Foods and Sysco are valued at 13.6x and 18.7x, respectively.

ETF investors seeking to add exposure to Supervalu can consider the WisdomTree SmallCap Earnings Fund (EES), which invests 0.4% of its portfolio in the company.

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