Here's Why We Think US Foods Holding (NYSE:USFD) Is Well Worth Watching

For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it currently lacks a track record of revenue and profit. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

In contrast to all that, many investors prefer to focus on companies like US Foods Holding (NYSE:USFD), which has not only revenues, but also profits. Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide US Foods Holding with the means to add long-term value to shareholders.

Check out our latest analysis for US Foods Holding

US Foods Holding's Earnings Per Share Are Growing

The market is a voting machine in the short term, but a weighing machine in the long term, so you'd expect share price to follow earnings per share (EPS) outcomes eventually. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. It certainly is nice to see that US Foods Holding has managed to grow EPS by 20% per year over three years. If growth like this continues on into the future, then shareholders will have plenty to smile about.

Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. US Foods Holding maintained stable EBIT margins over the last year, all while growing revenue 12% to US$35b. That's progress.

The chart below shows how the company's bottom and top lines have progressed over time. To see the actual numbers, click on the chart.

The trick, as an investor, is to find companies that are going to perform well in the future, not just in the past. While crystal balls don't exist, you can check our visualization of consensus analyst forecasts for US Foods Holding's future EPS 100% free.

Are US Foods Holding Insiders Aligned With All Shareholders?

We would not expect to see insiders owning a large percentage of a US$9.3b company like US Foods Holding. But we are reassured by the fact they have invested in the company. To be specific, they have US$46m worth of shares. This considerable investment should help drive long-term value in the business. Despite being just 0.5% of the company, the value of that investment is enough to show insiders have plenty riding on the venture.

Is US Foods Holding Worth Keeping An Eye On?

You can't deny that US Foods Holding has grown its earnings per share at a very impressive rate. That's attractive. With EPS growth rates like that, it's hardly surprising to see company higher-ups place confidence in the company through continuing to hold a significant investment. Fast growth and confident insiders should be enough to warrant further research, so it would seem that it's a good stock to follow. We don't want to rain on the parade too much, but we did also find 2 warning signs for US Foods Holding (1 is potentially serious!) that you need to be mindful of.

The beauty of investing is that you can invest in almost any company you want. But if you prefer to focus on stocks that have demonstrated insider buying, here is a list of companies with insider buying in the last three months.

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.