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When US Foods Holding Corp (NYSE:USFD) released its most recent earnings update (31 March 2018), I compared it against two factor: its historical earnings track record, and the performance of its industry peers on average. Understanding how US Foods Holding performed requires a benchmark rather than trying to assess a standalone number at one point in time. Below is a quick commentary on how I see USFD has performed. See our latest analysis for US Foods Holding
Were USFD’s earnings stronger than its past performances and the industry?
I like to use data from the most recent 12 months, which either annualizes the most recent 6-month earnings update, or in some cases, the most recent annual report is already the latest available financial data. This technique enables me to examine different companies in a uniform manner using the latest information. For US Foods Holding, its latest earnings (trailing twelve month) is US$484.80M, which, against last year’s figure, has rocketed up by more than double. Since these figures may be relatively short-term thinking, I have created an annualized five-year figure for US Foods Holding’s earnings, which stands at US$173.76M This suggests that, on average, US Foods Holding has been able to gradually grow its net income over the last few years as well.
How has it been able to do this? Let’s see whether it is solely due to industry tailwinds, or if US Foods Holding has seen some company-specific growth. In the last couple of years, US Foods Holding increased its bottom line faster than revenue by effectively controlling its costs. This resulted in a margin expansion and profitability over time. Looking at growth from a sector-level, the US consumer retailing industry has been growing its average earnings by double-digit 16.12% in the prior twelve months, and a less exciting 5.30% over the previous five years. This shows that whatever tailwind the industry is benefiting from, US Foods Holding is able to leverage this to its advantage.
What does this mean?
US Foods Holding’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. Positive growth and profitability are what investors like to see in a company’s track record, but how do we properly assess sustainability? You should continue to research US Foods Holding to get a more holistic view of the stock by looking at:
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Future Outlook: What are well-informed industry analysts predicting for USFD’s future growth? Take a look at our free research report of analyst consensus for USFD’s outlook.
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Financial Health: Is USFD’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
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Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
NB: Figures in this article are calculated using data from the trailing twelve months from 31 March 2018. This may not be consistent with full year annual report figures.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.