Stock Analysis

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

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NYSE:USFD
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It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. But the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses. Loss-making companies are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.

Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like US Foods Holding (NYSE:USFD). Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.

Check out our latest analysis for US Foods Holding

US Foods Holding's Improving Profits

Over the last three years, US Foods Holding has grown earnings per share (EPS) at as impressive rate from a relatively low point, resulting in a three year percentage growth rate that isn't particularly indicative of expected future performance. Thus, it makes sense to focus on more recent growth rates, instead. Outstandingly, US Foods Holding's EPS shot from US$0.71 to US$1.78, over the last year. Year on year growth of 151% is certainly a sight to behold.

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. EBIT margins for US Foods Holding remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 8.9% to US$35b. That's encouraging news for the company!

In the chart below, you can see how the company has grown earnings and revenue, over time. To see the actual numbers, click on the chart.

earnings-and-revenue-history
NYSE:USFD Earnings and Revenue History September 21st 2023

Of course the knack is to find stocks that have their best days in the future, not in the past. You could base your opinion on past performance, of course, but you may also want to check this interactive graph of professional analyst EPS forecasts for US Foods Holding.

Are US Foods Holding Insiders Aligned With All Shareholders?

We would not expect to see insiders owning a large percentage of a US$10.0b company like US Foods Holding. But we do take comfort from the fact that they are investors in the company. Indeed, they hold US$35m worth of its stock. This considerable investment should help drive long-term value in the business. While their ownership only accounts for 0.3%, this is still a considerable amount at stake to encourage the business to maintain a strategy that will deliver value to shareholders.

Is US Foods Holding Worth Keeping An Eye On?

US Foods Holding's earnings per share have been soaring, with growth rates sky high. That EPS growth certainly is attention grabbing, and the large insider ownership only serves to further stoke our interest. The hope is, of course, that the strong growth marks a fundamental improvement in the business economics. Based on the sum of its parts, we definitely think its worth watching US Foods Holding very closely. Still, you should learn about the 2 warning signs we've spotted with US Foods Holding.

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.

Valuation is complex, but we're helping make it simple.

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