In their note this morning, the firm said, "The company is a leading wholesale distributor and retailer in the grocery sector. Over the past few quarters, a new management team led by CEO Sam Duncan has helped to stabilize the enterprise and is now looking to execute upon the next phase of the turnaround.
"We believe SVU has all the makings of a successful early stage retail turnaround story with strong management, underproductive assets, stable financial profile, and muted investor expectations. We have learned with turnaround stories that forecasting near-term results can be a difficult exercise, and SUPERVALU is no different.
"The shares are appropriate for investors with a long-term horizon, in our view."
Separately, TheStreet Ratings team rates SUPERVALU INC as a Hold with a ratings score of C-. TheStreet Ratings Team has this to say about their recommendation:
"We rate SUPERVALU INC (SVU) a HOLD. The primary factors that have impacted our rating are mixed ? some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its increase in stock price during the past year, revenue growth and growth in earnings per share. However, as a counter to these strengths, we also find weaknesses including weak operating cash flow and poor profit margins."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- Compared to its price level of one year ago, SVU is up 13.46% to its most recent closing price of 7.50. Looking ahead, our view is that this company's fundamentals should not have much impact in either direction, allowing the stock to generally move up or down based on the push and pull of the broad market.
- SVU's revenue growth has slightly outpaced the industry average of 6.5%. Since the same quarter one year prior, revenues slightly increased by 1.4%. Growth in the company's revenue appears to have helped boost the earnings per share.
- SUPERVALU INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, SUPERVALU INC turned its bottom line around by earning $0.00 versus -$1.23 in the prior year. This year, the market expects an increase in earnings to $0.64 from $0.00.
- The gross profit margin for SUPERVALU INC is currently extremely low, coming in at 14.93%. Regardless of SVU's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 0.65% trails the industry average.
- Net operating cash flow has decreased to $292.00 million or 46.02% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- You can view the full analysis from the report here: SVU Ratings Report