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Unifirst (UNF) Soars to a 52-Week High, Time to Cash Out?

Have you been paying attention to shares of Unifirst UNF? Shares have been on the move with the stock up 9.8% over the past month. UNF hit a new 52-week high of $178.03 in the previous session. Unifirst has gained 7.2% since the start of the year compared to the -4.9% move for the Industrial Products sector and the 15.2% year-to-date return for its peer group.

What's Driving the Outperformance?

The stock has a great record of positive earnings surprises, having beaten the Zacks Consensus Estimate in each of the last four quarters. In its last earnings report on March 28, 2018, Unifirst reported EPS of $1.38 versus the Zacks Consensus Estimate of $1.07 while it beat the consensus revenue estimate by 3.44%.

For the current fiscal year, Unifirst is expected to post earnings of $7.3 per share on $1.67 billion in revenues. This represents a 38.26% change in EPS on a 4.89% change in revenues. For the next fiscal year, the company is expected to earn $7.28 per share on $1.73 billion in revenues. This represents a year-over-year change of -0.17% and 3.57%, respectively.

Valuation Metrics

Unifirst may be at a 52-week high right now, but what might the future hold for UNF? A key aspect of this question is taking a look at valuation metrics in order to determine if the company has run ahead of itself.

On this front, we can look at the Zacks Style Scores, as they provide investors with an additional way to sort through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM Score as well. The idea behind the style scores is to help investors pick the most appropriate Zacks Rank stocks based on their individual investment style.

Unifirst has a Value Score of C. The stock's Growth and Momentum Scores are C and C, respectively, giving the company a VGM Score of B.

In terms of its value breakdown, the stock currently trades at 24.2X current fiscal year EPS estimates. On a trailing cash flow basis, the stock currently trades at 18.2X versus its peer group's average of 18.2X. Additionally, the stock has a PEG ratio of 2.42. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.

Unifirst Corporation Price and Consensus

Unifirst Corporation Price and Consensus | Unifirst Corporation Quote

Zacks Rank

We also need to look at the Zacks Rank for the stock, as this supersedes any trend on the style score front. Fortunately, Unifirst currently has a Zacks Rank of #1 (Strong Buy) thanks to favorable earnings estimate revisions from covering analysts.

Since we recommend that investors select stocks carrying Zacks Rank of 1 or 2 (Buy) and Style Scores of A or B, it looks as if Unifirst meets the list of requirements. Thus, it seems as though UNF shares could still be poised for more gains ahead.


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