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UBS started off coverage on Chefs’ Warehouse (NASDAQ:CHEF) on Monday, at a Buy rating.
Analyst Mark Caden and team pointed to the specialty food supplier’s heavy focus on service, its wide selection of hard-to-find specialty & center of the plate items, and its broad footprint that have all helped it become a market leader for high end dining establishments. Caden said CHEF’s mid teens top-line CAGR from 2019-2022 compares favorably to larger players with more scale.
“It’s been successful growing organically & through M&A (~50-50 contributions). CHEF has also been finding ways to boost wallet share with existing customers, including scaling up in newer categories such as produce (its recent Hardie’s & Greenleaf acquisitions have contributed to this).”
The negative sentiment on the stock due to near-term deflationary pressures and economic concerns is seen moderating over the next few quarters to set up CHEF for a rally.
USB assigned a price target of $37 to CHEF after factoring in 8.5% sales growth and a 6.0% EBITDA margin. The PT represents a 10X EV/EBITDA multiple.
Chefs’ Warehouse (CHEF) notched 1.85% gain in early afternoon trading on Monday as it bounced off its recent 52-week low of $22.30. Short interest on the stock is at 8.63% of the total float.
