Is US Foods Holding Corp. (USFD) a Solid Growth Stock? 3 Reasons to Think " Yes "




  • In Business
  • 2020-02-14 17:45:05Z
  • By Zacks
 

Growth investors focus on stocks that are seeing above-average financial growth, as this feature helps these securities garner the market's attention and deliver solid returns. But finding a great growth stock is not easy at all.

In addition to volatility, these stocks carry above-average risk by their very nature. Also, one could end up losing from a stock whose growth story is actually over or nearing its end.

However, the Zacks Growth Style Score (part of the Zacks Style Scores system), which looks beyond the traditional growth attributes to analyze a company's real growth prospects, makes it pretty easy to find cutting-edge growth stocks.

Our proprietary system currently recommends US Foods Holding Corp. (USFD) as one such stock. This company not only has a favorable Growth Score, but also carries a top Zacks Rank.

Research shows that stocks carrying the best growth features consistently beat the market. And returns are even better for stocks that possess the combination of a Growth Score of A or B and a Zacks Rank #1 (Strong Buy) or 2 (Buy).

While there are numerous reasons why the stock of this company is a great growth pick right now, we have highlighted three of the most important factors below:

Earnings Growth

Earnings growth is arguably the most important factor, as stocks exhibiting exceptionally surging profit levels tend to attract the attention of most investors. For growth investors, double-digit earnings growth is highly preferable, as it is often perceived as an indication of strong prospects (and stock price gains) for the company under consideration.

While the historical EPS growth rate for US Foods Holding Corp. is 19.1%, investors should actually focus on the projected growth. The company's EPS is expected to grow 11.5% this year, crushing the industry average, which calls for EPS growth of 6.1%.

Cash Flow Growth

While cash is the lifeblood of any business, higher-than-average cash flow growth is more important and beneficial for growth-oriented companies than for mature companies. That's because, growth in cash flow enables these companies to expand their businesses without depending on expensive outside funds.

Right now, year-over-year cash flow growth for US Foods Holding Corp. is 34%, which is higher than many of its peers. In fact, the rate compares to the industry average of 1.8%.

While investors should actually consider the current cash flow growth, it's worth taking a look at the historical rate too for putting the current reading into proper perspective. The company's annualized cash flow growth rate has been 17.9% over the past 3-5 years versus the industry average of 7.1%.

Promising Earnings Estimate Revisions

Beyond the metrics outlined above, investors should consider the trend in earnings estimate revisions. A positive trend is a plus here. Empirical research shows that there is a strong correlation between trends in earnings estimate revisions and near-term stock price movements.

There have been upward revisions in current-year earnings estimates for US Foods Holding Corp. The Zacks Consensus Estimate for the current year has surged 1.9% over the past month.

Bottom Line

While the overall earnings estimate revisions have made US Foods Holding Corp. a Zacks Rank #2 stock, it has earned itself a Growth Score of A based on a number of factors, including the ones discussed above.

You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

This combination indicates that US Foods Holding Corp. is a potential outperformer and a solid choice for growth investors.


Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

To read this article on Zacks.com click here.

Zacks Investment Research

COMMENTS

More Related News

Is Skyworks Solutions, Inc.
Is Skyworks Solutions, Inc.'s (NASDAQ:SWKS) P/E Ratio Really That Good?

The goal of this article is to teach you how to use price to earnings ratios (P/E ratios). We'll look at Skyworks...

Here
Here's Why We Think BioTelemetry (NASDAQ:BEAT) Is Well Worth Watching

Like a puppy chasing its tail, some new investors often chase 'the next big thing', even if that means buying 'story...

Is Wilmington plc
Is Wilmington plc's (LON:WIL) High P/E Ratio A Problem For Investors?

This article is for investors who would like to improve their understanding of price to earnings ratios (P/E ratios...

A Rising Share Price Has Us Looking Closely At MBH Corporation PLC
A Rising Share Price Has Us Looking Closely At MBH Corporation PLC's (FRA:M8H) P/E Ratio

MBH (FRA:M8H) shares have had a really impressive month, gaining 38%, after some slippage. But shareholders may not...

Did The Underlying Business Drive AB Dynamics
Did The Underlying Business Drive AB Dynamics's (LON:ABDP) Lovely 955% Share Price Gain?

It hasn't been the best quarter for AB Dynamics plc (LON:ABDP) shareholders, since the share price has fallen 27% in...

Leave a Comment

Your email address will not be published. Required fields are marked with *

Cancel reply

Comments

Top News: Business