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Is It Time To Consider Buying US Foods Holding Corp. (NYSE:USFD)?

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Simply Wall St
·3 min read
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US Foods Holding Corp. (NYSE:USFD), which is in the consumer retailing business, and is based in United States, led the NYSE gainers with a relatively large price hike in the past couple of weeks. As a mid-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, what if the stock is still a bargain? Today I will analyse the most recent data on US Foods Holding’s outlook and valuation to see if the opportunity still exists.

See our latest analysis for US Foods Holding

What is US Foods Holding worth?

Great news for investors – US Foods Holding is still trading at a fairly cheap price according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. I’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 10.5x is currently well-below the industry average of 17.67x, meaning that it is trading at a cheaper price relative to its peers. However, given that US Foods Holding’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.

What kind of growth will US Foods Holding generate?

NYSE:USFD Past and Future Earnings April 13th 2020
NYSE:USFD Past and Future Earnings April 13th 2020

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. US Foods Holding’s earnings over the next few years are expected to increase by 66%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.

What this means for you:

Are you a shareholder? Since USFD is currently below the industry PE ratio, it may be a great time to accumulate more of your holdings in the stock. With an optimistic outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as capital structure to consider, which could explain the current price multiple.

Are you a potential investor? If you’ve been keeping an eye on USFD for a while, now might be the time to enter the stock. Its prosperous future profit outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy USFD. But before you make any investment decisions, consider other factors such as the track record of its management team, in order to make a well-informed assessment.

Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on US Foods Holding. You can find everything you need to know about US Foods Holding in the latest infographic research report. If you are no longer interested in US Foods Holding, you can use our free platform to see my list of over 50 other stocks with a high growth potential.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.