- If you have been wondering whether US Foods Holding at around US$89.33 is starting to look fully priced or still offers value, this breakdown is for you.
- The stock has had a mixed short term patch, with a 2.6% decline over 7 days and a 7.6% decline over 30 days, sitting against stronger returns of 19.7% year to date, 36.2% over 1 year and 141.8% over 5 years.
- Recent coverage around US Foods Holding has focused on how the share price performance compares with peers and what that might signal about investor expectations for the business. Other commentary has centred on balance sheet strength and cash generation, which are both key ingredients investors often watch when reassessing risk and return.
- Right now the company scores 4 out of 6 on Simply Wall St's valuation checks. You can see the breakdown in the valuation score. Next is a look at what different valuation methods say about the stock, followed by a broader way to think about value beyond a single number.
Approach 1: US Foods Holding Discounted Cash Flow (DCF) Analysis
A Discounted Cash Flow model takes the cash that a company is expected to generate in the future and discounts those amounts back to today, to estimate what the business might be worth right now.
For US Foods Holding, the model used is a 2 Stage Free Cash Flow to Equity approach, based on cash flow projections. The latest twelve month Free Cash Flow is about $999.5m. Analysts provide explicit Free Cash Flow estimates up to 2028, with Simply Wall St extrapolating further to build a 10 year path of projected cash flows, including an estimate of $1,891.0m in 2035. All of these future figures are discounted back into today’s dollars in US$.
On this basis, the DCF output suggests an estimated intrinsic value of $155.52 per share. Against a current share price around $89.33, this implies the share price is about 42.6% below that intrinsic value. Under this particular model, the stock appears to be trading at a discount to its estimated intrinsic value.
Result: UNDERVALUED
Our Discounted Cash Flow (DCF) analysis suggests US Foods Holding is undervalued by 42.6%. Track this in your watchlist or portfolio, or discover 55 more high quality undervalued stocks.
Approach 2: US Foods Holding Price vs Earnings
For a profitable company, the P/E ratio is a straightforward way to link what you pay for the stock to what the business currently earns. It gives you a quick sense of how many dollars investors are willing to pay today for each dollar of earnings.
What counts as a “normal” P/E depends on how quickly earnings are expected to grow and how risky those earnings look. Higher expected growth or lower perceived risk can justify a higher P/E, while lower growth or higher risk usually points to a lower multiple being reasonable.
US Foods Holding currently trades on a P/E of 29.14x. That is close to both its peer average of 29.04x and above the broader Consumer Retailing industry average P/E of 19.21x. Simply Wall St’s “Fair Ratio” for the company is 32.39x, which is a proprietary estimate of the P/E that might be expected given factors such as earnings growth, profit margins, industry, market cap and company specific risks.
Because the Fair Ratio is tailored to US Foods Holding’s own profile, it can be more informative than a simple comparison with peers or the industry. With a current P/E of 29.14x versus a Fair Ratio of 32.39x, the shares screen as trading below that fair multiple on this measure.
Result: UNDERVALUED
P/E ratios tell one story, but what if the real opportunity lies elsewhere? Start investing in legacies, not executives. Discover our 20 top founder-led companies.
Upgrade Your Decision Making: Choose your US Foods Holding Narrative
Earlier it was mentioned that there is an even better way to understand valuation. Narratives bring that to life by letting you attach a clear story about US Foods Holding to the numbers you care about. They link your view of its future revenue, earnings and margins to a forecast, and then to a fair value that you can compare with the current price. All of this is available within a simple tool on Simply Wall St’s Community page that updates automatically when new news or earnings arrive. One investor might build a Narrative around a higher fair value closer to the most bullish analyst target of US$103.0, based on confidence in areas like digital platforms, private label and specialized delivery. Another might lean toward the lowest target of US$82.0 because they are more focused on risks like consumer demand, M&A execution and regulation. Seeing those different narratives side by side can help you decide whether the current share price lines up with your own view of the stock.
Do you think there's more to the story for US Foods Holding? Head over to our Community to see what others are saying!
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 editorial-team@simplywallst.com