US Foods Holding (USFD) Joins Defensive Indices, Is The Stock Fully Valued?

US Foods Holding (USFD) has drawn fresh attention after being added to the Russell 1000 Defensive Index and Russell 1000 Value Defensive Index, coinciding with a post earnings share price move higher.

See our latest analysis for US Foods Holding.

The index additions and post earnings reaction come on top of strong recent momentum, with US Foods Holding’s 30 day share price return of 22.91% and year to date share price return of 39.32%, alongside a 5 year total shareholder return of 190.72%.

If this kind of move has you looking beyond food distributors, it could be a good time to scan the market for other potential opportunities using our 19 top founder-led companies

After the post earnings jump and fresh index inclusion, US Foods Holding now trades only slightly below published analyst targets while certain models suggest a small premium, so is the market still being cautious or already paying up?

Most Popular Narrative: 0.5% Undervalued

The most followed narrative values US Foods Holding at $104.50 per share, almost in line with the last close of $103.99, and builds its case on detailed earnings, margin and cash flow assumptions.

The analysts have a consensus price target of $104.5 for US Foods Holding based on their expectations of its future earnings growth, profit margins and other risk factors.

However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $120.0, and the most bearish reporting a price target of just $61.0.

Read the complete narrative.

Want to see what is baking in that fair value for US Foods Holding? The narrative leans on steady revenue progress, fatter margins and a higher future earnings base. Curious how those ingredients stack up when discounted back at just over 7% and paired with a premium earnings multiple.

Result: Fair Value of $104.50 (ABOUT RIGHT)

Have a read of the narrative in full and understand what’s behind the forecasts.

However, softer chain restaurant traffic and the possibility that margin improvements hit a ceiling could still derail the current US Foods Holding fair value narrative.

Find out about the key risks to this US Foods Holding narrative.

Another View: What US Foods Holding’s P/E Is Signalling

The analyst narrative suggests US Foods Holding is close to fair value, but its pricing tells a different story. The stock trades on a P/E of 33.8x versus 18.5x for the US Consumer Retailing industry and a fair ratio of 29.2x. This points to a premium that could narrow if sentiment cools.

For a closer look at how this P/E premium compares with both peers and the fair ratio the market could move toward, take a look at our valuation breakdown, starting with the See what the numbers say about this price — find out in our valuation breakdown.

Next Steps

Feeling mixed about whether the recent enthusiasm around US Foods Holding is justified or stretched? Take a closer look at both sides of the story with the 2 key rewards and 1 important warning sign.

Looking for more investment ideas beyond US Foods Holding?

If the recent move in US Foods Holding has sharpened your interest, do not stop here. Broaden your watchlist now and keep fresh ideas on your radar.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email [email protected]