UFI - Unifi: Bargain Basement Valuation Still Struggling To Convince Investors

2024-03-16 12:11:11 ET

Summary

• Unifi's margins have historically been under pressure due to staffing constraints and the high cost of goods sold.
• The company's long-term support failed in 2022, leading to consecutive months of lower lows and a 58% decline in shares.
• Unifi's Q2-2024 earnings showed improved gross margin and profitability, but significant improvements are needed for sustained growth.

Intro

We wrote about Unifi , Inc. ( UFI ) in July of 2022 when we rated the recycled & synthetic product manufacturer a 'Hold' for several reasons. Despite sporting a keen valuation at the time, the company's margins remained under pressure due to US staffing constraints as well as the elevated cost of goods sold. To combat pressurized margins, companies such as Unifi must turn over as much product as possible (through elevated volumes) so economies of scale can somewhat compensate for higher input costs over time. Nevertheless, Unifi at the time was also being affected on the volume side primarily in the Asian region due to sustained pandemic-related lockdowns....

For further details see: