Is Performance Food Group undervalued based on future cash flows and its price relative to the stock market?
Value is all about what a company is worth versus what price it is available for. If you went into a grocery store and all the bananas were on sale at half price, they could be considered undervalued.
INTRINSIC VALUE BASED ON FUTURE CASH FLOWS
Here we compare the current
share price of Performance Food Group to its discounted cash flow value.
The discounted cash flow value is simply looking at what the company is worth today, based on estimates of how much money it is expected to make in the future.
How is this discounted cash flow calculated?
- The current share price of Performance Food Group is above its future cash flow value.
Often investors are willing to pay a premium for a company that has a high dividend or the potential for future growth.
We assess Performance Food Group's value by looking at:
- Is the discounted cash flow value less than 20%, or 40% of the share price? (2 checks) (Click here or on bar chart for details of DCF calculation.)
- Is the PE ratio less than the market average, and/ or less than the Food and Staples Retailing industry average (and greater than 0)? (2 checks)
- Is the PEG ratio within a reasonable range (0 to 1)? (1 check)
- Is the PB ratio less than the Food and Staples Retailing industry average (and greater than 0)? (1 check)
Performance Food Group has a total score of 1/6, see the detailed checks below.
Note: We use GAAP Earnings per Share in all our calculations including PE and PEG Ratio.
Note 2: PEG ratio is based on analysts EPS growth expectations in 1 year (22.18%).
Full details on the Value part of the Simply Wall St company analysis model.
Discounted cash flow (Free cash flow to Equity)
The calculations below outline how an intrinsic value for Performance Food Group is arrived at by discounting future cash flows to their present value. We use analyst's estimates of cash flows going forward 5 years.
5 year cash flow forecast
See our documentation to learn about this calculation.
|Levered FCF (USD, Millions)
||Extrapolated @ (7.2%)
||Extrapolated @ (7.2%)
Discounted (@ 8.5%)
Present value of next 5 years cash flows:
Terminal Value = FCF2021 × (1 + g) ÷ (Discount Rate – g)
Terminal Value = $136 × (1 + 2.3%) ÷ (8.47% – 2.3%)
Terminal value based on the Perpetuity Method where growth (g) = 2.3%:
Present value of terminal value:
Equity Value (Total value) = Present value of next 5 years cash flows + terminal value
Value = Total value / Shares Outstanding ($1,926 / 104)
Value per share:
Current discount (share price of $28.7): -55%
Estimate of Discount Rate
The discount rate, or required rate of return, is estimated by calculating the Cost of Equity.
Discount rate = Cost of Equity = Risk Free Rate + (Levered Beta * Equity Risk Premium)
Discount rate = 8.47% = 2.33% + (0.8 * 7.67%)
Estimate of Bottom Up Beta
The Levered Beta is the Unlevered Beta adjusted for financial leverage. It is limited to 0.8 to 2.0 (practical range for a stable firm).
Levered Beta = Unlevered beta (1 + (1- tax rate) (Debt/Equity))
0.791 = 0.606 (1 + (1- 30%) (43.45%))
Levered Beta used in calculation = 0.8
- The risk free rate of 2.33% is from the 10 year government bond rate in US.
- The bottom-up beta is estimated by analysing other companies in the same industry.
- The Equity Risk Premium is calculated by subtracting the risk free rate from the market return premium (10%) (source: Buffet).
- The dividend discount model is automatically used for companies in the following industries: Banks, Insurance, Real Estate Investment Trusts (REITs), Diversified Financial Services and Capital Markets.
How is Performance Food Group expected to perform in the next 1 to 3 years based on estimates from 9 analysts?
The future performance of a company is measured in the same way as past performance, by looking at estimated growth and how much profit it is expected to make.
Future estimates come from professional analysts. Just like forecasting the weather, they don’t always get it right!
Expected earnings growth over 3 years.
Future Earnings growth analysis
Is Performance Food Group expected to grow at an attractive rate? We look at the 1 year and 3 year growth below.
Are Performance Food Group's annual earnings growth expected to exceed 3.4% over the next 3 years?
- After 1 year
- After 3 years
1 & 3 year estimated growth in earnings
Past and Future Earnings per Share
The accuracy of the analysts who estimate the future performance data can be gauged below. We look back 3 years and see if they were any good at predicting what actually occured. We also show the highest and lowest estimates looking forward to see if there is a wide range.
Analysts growth expectations
2 year growth check
Which of the these is expected to increase by over 50% in 2 year's time?
- Cash flow data unavailable.
Performance in 3 years
In the same way as past performance we look at the future estimated return (profit) compared to the available funds. We do this looking forward 3 years.
- Performance Food Group is not expected to perform strongly, Return on Equity (ROE) in 3 years is estimated to be below 20%.
Improvement & Relative to industry
- Expected to be less than the Food and Staples Retailing industry average.
- A decline in Performance Food Group's performance (ROE) is expected over the next 3 years.
Future performance checks
We assess Performance Food Group's future performance by looking at:
- Is the growth in earnings expected to beat the low risk savings rate, plus a premium to keep pace with inflation, in 1 year and 3 years? (2 checks)
- Does the average analyst expect Revenue to increase by 50% or more in 2 years? (1 check)
- Does the average analyst expect Operating Cash Flow to increase by 50% or more in 2 years? (1 check)
- Does the average analyst expect Net Income (Profit) to increase by 50% or more in 2 years? (1 check)
- Is the Return on Equity in 3 years expected to be over 20%? (1 check)
Some of the above checks will fail if the company is expected to be loss making in the relevant year.
Performance Food Group has a total score of 3/6, see the detailed checks below.
Note: If no +3 year data is available, +2.5 year data may be used.
Note 2: We use GAAP per Share in all our calculations.
Full details on the Future part of the Simply Wall St company analysis model.
How has Performance Food Group performed over the past 5 years?
The past performance of a company can be measured by how much growth it has experienced and how much profit it makes relative to the funds and assets it has available.
Past earnings growth
Below we compare Performance Food Group's growth in the last year to its industry (Food and Staples Retailing).
Past Earnings growth analysis
We also check if the company has grown in the past 5 years, and whether it has maintained that growth in the year.
- Performance Food Group's earnings growth has exceeded the industry average over the past year.
- Performance Food Group's 1 year earnings growth exceeds its 5 year annual average (35.5% vs 28%).
- Performance Food Group has delivered strong earnings growth in the past 5 years.
Performance Food Group's revenue and profit over the past 5 years is shown below, any years where they have experienced a loss will show up in red.
Performance last year
We want to ensure a company is making the most of what it has available. This is done by comparing the return (profit) to a company's available funds, assets and capital.
- Poor return on shareholders funds (ROE) last year.
- Performance Food Group performed worse than the Food and Staples Retailing industry average based on return on assets (ROA) last year.
- Performance based on revenue producing assets (ROCE) has improved significantly over 3 years.
Past performance checks
We assess Performance Food Group's performance over the past 5 years by checking for:
- Has earnings per share (EPS) increased in past 5 years? (1 check)
- Has the EPS growth in the last year exceeded that of the Food and Staples Retailing industry? (1 check)
- Is the current EPS growth higher than the average annual growth over the past 5 years? (1 check)
- Is the Return on Equity (ROE) higher than 20%? (1 check)
- Is the Return on Assets (ROA) above industry average? (1 check)
- Has the Return on Capital Employed (ROCE) increased from 3 years ago? (1 check)
The above checks will fail if the company has reported a loss in the most recent earnings report. Some checks require at least 3 or 5 years worth of data.
Performance Food Group has a total score of 4/6, see the detailed checks below.
Note: We use GAAP Earnings per Share in all our calculations.
Full details on the Past part of the Simply Wall St company analysis model.
How is Performance Food Group's financial health and their level of debt?
A company's financial position is much like your own financial position, it includes everything you own (assets) and owe (liabilities).
The boxes below represent the relative size of what makes up Performance Food Group's finances.
The net worth of a company is the difference between its assets and liabilities.
- Performance Food Group is able to meet its short term (1 year) commitments with its holdings of cash and other short term assets.
- Performance Food Group's cash and other short term assets cover its long term commitments.
This treemap shows a more detailed breakdown of Performance Food Group's finances.
If any of them are yellow this indicates they may be out of proportion and red means they relate to one of the checks below.
Liabilities and shares
The 'shares' portion represents any funds contributed by the owners (shareholders) and any profits.
- High level of stock/ inventory/ unsold assets.
- Total debt is covered by short term assets.
Nearly all companies have debt. Debt in itself isn’t bad, however if the debt is too high, or the company can’t afford to pay the interest on its debts this may have impacts in the future.
The graphic below shows equity (available funds) and debt, we ideally want to see the red area (debt) decreasing.
If there is any debt we look at the companies capability to repay it, and whether the level has increased over the past 5 years.
- The level of debt (140%) compared to net worth is high (greater 40%).
- Past 5 year debt information not available.
- Total debt is not well covered by annual operating cash flow (less than 20% of total debt).
- Interest on debt is well covered by earnings (3.9x coverage).
Financial health checks
We assess Performance Food Group's financial health by checking for:
Full details on the Health part of the Simply Wall St company analysis model.
- Are short term assets greater than short term liabilities? (1 check)
- Are short term assets greater than long term liabilities? (1 check)
- Has the debt to equity ratio increased in the past 5 years? (1 check)
- Is the debt to equity ratio over 40%? (1 check)
- Is the debt covered by short term assets? (1 check)
- Are earnings greater than 5x the interest on debt (if comapany pays interest at all)? (1 check)
Performance Food Group has a total score of 3/6, see the detailed checks below.
What is Performance Food Group's current dividend yield, its reliability and sustainability?
Dividends are regular cash payments to you from the company, similar to a bank paying you interest on a savings account.
Annual Dividend Income
Current annual income from Performance Food Group dividends.
If you bought $2,000 of Performance Food Group shares you are expected to receive $0 in your first year as a dividend.
Here we look how much dividend is being paid, if any. Is it above what you can get in a savings account?
It is up there with the best dividend paying companies?
- Paying below low risk savings rate. (2.25%)
- Paying below the markets top dividend payers. (3.18%)
Historical dividend yield
It is important to see if the dividend for a company is stable, and not wildly increasing/decreasing each year. This graph shows you the historical rate to count toward your assessment of the stock.
We also check to see if the dividend has increased in the past 10 years.
- Not paying a notable dividend.
- Not paying a notable dividend.
Current Payout to shareholders
What portion of Performance Food Group's earnings are paid to the shareholders as a dividend.
- Not paying a notable dividend.
Future Payout to shareholders
- Insufficient estimate data to determine if a dividend will be paid in 3 years.
Income/ dividend checks
We assess Performance Food Group's dividend by checking for:
Full details on the Dividends part of the Simply Wall St company analysis model.
- Firstly is the company paying a notable dividend (greater than 0.5%) - if not then the rest of the checks are ignored.
- Current dividend yield, is there one at all, is it higher than the low risk savings rate, and is it above the top 25% of dividend payers? (2 checks)
- Have they paid a dividend for 10 years, and during this period has the dividend been volatile (drop of more than 25%)? (1 check)
- If they have paid a dividend for 10 years has it increased in this time? (1 check)
- How sustainable is the dividend, can Performance Food Group afford to pay it from its earnings today and in 3 years (Payout ratio less than 90%)? (2 checks)
Performance Food Group has a total score of 0/6, see the detailed checks below.
What is the CEO of Performance Food Group's salary, the management and board of directors tenure and is there insider trading?
Management is one of the most important areas of a company. We look at unreasonable CEO compensation, how long the team and board of directors have been around for and insider trading.
Mr. George L. Holm has been the Chief Executive Officer and President of Performance Food Group Company since September 2002. Mr. Holm served as an Acting Chief Executive Officer and President of Performance Foodservice. He served as the Chief Executive Officer and President at Performance Food Group of Texas, LLC. Mr. Holm has been the Chief Executive Officer and President at Performance Food Group Company, LLC (now Performance Food Group, Inc.) since May 2008. He served as the Chief Executive Officer of Roma Food Enterprises, Inc., a subsidiary of Performance Food Group Co. He served as the Chief Executive Officer of VISTAR Specialty distribution centers VistaCorporation. He served as the President of Roma Food Enterprises, Inc., a subsidiary of Performance Food Group Co. He has been an executive in the fcoodservice distribution industry for 30 years and prior to joining VISTAR, he held senior leadership roles with Alliant Food service Inc., U.S. Foodservice Inc., and Sysco Corporation. In 2002,. He served as a Director of UniPro Foodservice, Inc. He serves as a Director of Performance Food Group Company, LLC. He has been a Director at Performance Food Group Company since 2002. Mr. Holm received a bachelor’s degree in business administration from Grand Canyon University
- CEO's compensation has been consistent with company performance over the past year.
- CEO's compensation is higher than average for a company of this size and profit level.
Management Team Tenure
Average tenure of the Performance Food Group management team:
- The average tenure for the Performance Food Group management team is over 5 years, this suggests they are a seasoned and experienced team.
Executive Vice President of Operations
Senior Vice President
Executive Vice President
Executive VP & CFO
Chief Accounting Officer
Board of Directors Tenure
Average tenure of the Performance Food Group board of directors:
- The tenure for the Performance Food Group board of directors is about average.
Board of Directors
E. Bruce McEvoy
Recent Insider Trading
- Performance Food Group insiders have sold more shares than they have bought in the past 3 months.
Who owns this company?
We assess Performance Food Group's management by checking for:
- Is the CEO's compensation unreasonable compared to market cap and profit (greater than 0.5% of the company's profit + 0.03% of market cap)? (1 check)
- Has the CEO's compensation increased more than 20% whilst the EPS is down more then 20%? (1 check)
- Is the average tenure of the management team less than 2 years? (1 check)
- Is the average tenure of the board of directors team less than 3 years? (1 check)
Performance Food Group has a total score of 6/6, this is not included on the snowflake, see the detailed checks below.
Note: We use the top 6 management executives and board members in our calculations.
Note 2: Insider trading include any internal stakeholders and these transactions
Full details on the Management part of the Simply Wall St company analysis model.
Performance Food Group Company, through its subsidiaries, markets and distributes food and food-related products in the United States. It operates in three operating segments: Performance Foodservice, PFG Customized, and Vistar. The company offers a range of frozen foods, such as meats, fully prepared appetizers and entrees, fruits, vegetables, and desserts; canned and dry foods; fresh meats; dairy products; beverage products; imported specialties; fresh produce; and candy, snack, and other products, as well as seafood products, shortenings and oils, baked goods, and salad dressings. It also supplies various non-food items, such as paper products, including pizza boxes, disposable napkins, plates, and cups; tableware comprising chinaware and silverware; cookware consisting of pots, pans, and utensils; restaurant and kitchen equipment and supplies; and cleaning supplies. In addition, the company provides value-added services related to foodservice distribution, such as providing customers with electronic order-taking, payment, and other Internet based services; and various reports and other data, menu planning advice, food safety training, and assistance in inventory control, as well as access to various third-party services designed to add value to its customers’ businesses. It serves street and chain restaurants, schools, business and industry locations, hospitals, vending distributors, office coffee service distributors, big box retailers, and theaters, as well as franchises and other institutional customers. Performance Food Group Company was founded in 2002 and is headquartered in Richmond, Virginia.
|Name:||Performance Food Group Company|
|Market Cap:||$2,987 million|
12500 West Creek Parkway, Richmond, 23238, United States
Performance Food Group employees.
|Sector:||Food and Staples Retailing|