The stock of US Foods Holding (USFD, Financial) has seen a daily gain of 3.94%, although it has suffered a loss of -2.72% over the past three months. With an Earnings Per Share (EPS) (EPS) standing at 1.85, the question arises: is the stock fairly valued? This article aims to provide a detailed analysis of US Foods Holding's valuation, encouraging you to read on for a comprehensive understanding of the company's financial health.
US Foods Holding Corp (USFD, Financial) is the second-largest U.S. food service distributor, holding an 11% market share in the highly fragmented food service distribution industry. The company distributes more than 400,000 food and nonfood products to various sectors, including healthcare, hospitality, restaurants, and education. With a current stock price of $40.58, the company's market cap stands at $10 billion, fairly aligning with its GF Value of $39.48.
Understanding the GF Value
The GF Value is a proprietary measure that represents the current intrinsic value of a stock. It is calculated based on historical trading multiples, an internal adjustment factor based on the company's past performance and growth, and future business performance estimates. The GF Value Line on our summary page provides an overview of the stock's fair trading value. If the stock price is significantly above the GF Value Line, it is overvalued, and its future return is likely to be poor. On the other hand, if it is significantly below the GF Value Line, its future return will likely be higher.
As per our valuation method, US Foods Holding (USFD, Financial) is believed to be fairly valued. The stock's fair value is estimated based on historical multiples, an internal adjustment based on the company's past business growth, and analyst estimates of future business performance. At its current price of $40.58 per share, US Foods Holding has a market cap of $10 billion, and the stock is believed to be fairly valued. As a result, the long-term return of its stock is likely to be close to the rate of its business growth.
Financial Strength Analysis
Investing in companies with poor financial strength can result in a high risk of permanent capital loss. To avoid this, it's crucial to review a company's financial strength before deciding to purchase shares. US Foods Holding's cash-to-debt ratio stands at 0.08, ranking worse than 82.35% of 306 companies in the Retail - Defensive industry. The overall financial strength of US Foods Holding is 6 out of 10, indicating fair financial health.
Profitability and Growth
Investing in profitable companies, especially those demonstrating consistent profitability over the long term, poses less risk. US Foods Holding has been profitable for 7 out of the past 10 years. Over the past twelve months, the company reported a revenue of $35 billion and EPS of $1.85. Its operating margin is 2.66%, ranking worse than 56.54% of 306 companies in the Retail - Defensive industry. Overall, the profitability of US Foods Holding is ranked at 7 out of 10, indicating fair profitability.
Growth is a crucial factor in the valuation of a company. The 3-year average annual revenue growth rate of US Foods Holding is 8.5%, ranking better than 64.48% of 290 companies in the Retail - Defensive industry. However, the 3-year average EBITDA growth rate is -3.1%, ranking worse than 79.84% of 258 companies in the same industry.
ROIC vs WACC
Comparing a company's return on invested capital (ROIC) and the weighted cost of capital (WACC) provides another perspective on its profitability. ROIC measures how efficiently a company generates cash flow relative to the capital it has invested in its business. WACC is the rate that a company is expected to pay on average to all its security holders to finance its assets. Ideally, ROIC should be higher than the WACC. For the past 12 months, US Foods Holding's ROIC is 6.85, and its WACC is 9.36.
In summary, the stock of US Foods Holding Corp (USFD, Financial) is believed to be fairly valued. The company's financial condition is fair, and its profitability is fair. Its growth ranks worse than 79.84% of 258 companies in the Retail - Defensive industry. To learn more about US Foods Holding stock, you can check out its 30-Year Financials here.
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