Over the last six months, UniFirst’s shares have sunk to $156.42, producing a disappointing 12.4% loss - a stark contrast to the S&P 500’s 22.6% gain. This was partly due to its softer quarterly results and might have investors contemplating their next move.
Is now the time to buy UniFirst, or should you be careful about including it in your portfolio? Check out our in-depth research report to see what our analysts have to say, it’s free for active Edge members.
Why Is UniFirst Not Exciting?
Even though the stock has become cheaper, we don't have much confidence in UniFirst. Here are three reasons there are better opportunities than UNF and a stock we'd rather own.
1. Lackluster Revenue Growth
We at StockStory place the most emphasis on long-term growth, but within business services, a stretched historical view may miss recent innovations or disruptive industry trends. UniFirst’s recent performance shows its demand has slowed as its annualized revenue growth of 4.4% over the last two years was below its five-year trend. 
2. EPS Barely Growing
We track the long-term change in earnings per share (EPS) because it highlights whether a company’s growth is profitable.
UniFirst’s EPS grew at a weak 2.3% compounded annual growth rate over the last five years, lower than its 6.2% annualized revenue growth. This tells us the company became less profitable on a per-share basis as it expanded.
3. Previous Growth Initiatives Haven’t Impressed
Growth gives us insight into a company’s long-term potential, but how capital-efficient was that growth? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).
UniFirst historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 7.5%, somewhat low compared to the best business services companies that consistently pump out 25%+.
Final Judgment
UniFirst isn’t a terrible business, but it doesn’t pass our bar. After the recent drawdown, the stock trades at 22.3× forward P/E (or $156.42 per share). Investors with a higher risk tolerance might like the company, but we think the potential downside is too great. We're pretty confident there are superior stocks to buy right now. We’d recommend looking at one of Charlie Munger’s all-time favorite businesses.
Stocks We Would Buy Instead of UniFirst
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