Here's Why We Think Performance Food Group (NYSE:PFGC) Is Well Worth Watching
Investors are often guided by the idea of discovering 'the next big thing', even if that means buying 'story stocks' without any revenue, let alone profit. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. 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.
If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in Performance Food Group (NYSE:PFGC). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.
View our latest analysis for Performance Food Group
Performance Food Group's Improving Profits
Even when EPS earnings per share (EPS) growth is unexceptional, company value can be created if this rate is sustained each year. So EPS growth can certainly encourage an investor to take note of a stock. It's an outstanding feat for Performance Food Group to have grown EPS from US$0.27 to US$1.70 in just one year. When you see earnings grow that quickly, it often means good things ahead for the company. Could this be a sign that the business has reached an inflection point?
Top-line growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and taxation (EBIT) margin, it's a great way for a company to maintain a competitive advantage in the market. While we note Performance Food Group achieved similar EBIT margins to last year, revenue grew by a solid 35% to US$53b. That's progress.
You can take a look at the company's revenue and earnings growth trend, in the chart below. To see the actual numbers, click on the chart.
You don't drive with your eyes on the rear-view mirror, so you might be more interested in this free report showing analyst forecasts for Performance Food Group's future profits.
Are Performance Food Group Insiders Aligned With All Shareholders?
Since Performance Food Group has a market capitalisation of US$9.2b, we wouldn't expect insiders to hold a large percentage of shares. But we are reassured by the fact they have invested in the company. Indeed, they have a considerable amount of wealth invested in it, currently valued at US$185m. This suggests that leadership will be very mindful of shareholders' interests when making decisions!
Should You Add Performance Food Group To Your Watchlist?
Performance Food Group'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. At times fast EPS growth is a sign the business has reached an inflection point, so there's a potential opportunity to be had here. So based on this quick analysis, we do think it's worth considering Performance Food Group for a spot on your watchlist. Still, you should learn about the 2 warning signs we've spotted with Performance Food Group (including 1 which is potentially serious).
Although Performance Food Group certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see insider buying, then this free list of growing companies that insiders are buying, could be exactly what you're looking for.
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.
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