This food distributor has also just been recommended by Zacks, who cited the company’s earnings growth, asset utilization, and upward EPS revisions as attractive.
Performance Food Group Company (PFGC)
From Upside
Performance Food Group Company (PFGC), the third-largest U.S. food distributor, holds a 6% slice of the highly-fragmented U.S. market. The company supplies restaurants, schools, hospitals, retailers, and movie theaters. Its focus on large restaurant chains contributes to narrower profit margins than peers.
But Performance Food has managed to pry wider its gross profit margin in 12 straight quarters, while its returns on assets and investment have sharply improved in the past couple years. Although restaurant industry sales growth appears to be slowing, Performance Food has won new customers and improved penetration with existing accounts.
For the 12 months ended September, Performance Food grew earnings per share 30%, revenue 4%, operating cash flow 31%, and free cash flow 37%. Analyst profit estimates for fiscal 2019 ending June have risen over the past 90 days, with the consensus now calling for 8% growth on 5% higher revenue.
The stock held up well last year, slipping just 3%, while the S&P SmallCap 600 Index fell 10%. In the opening weeks of 2019, Performance Food shares are up 6% but still earn a solid Quadrix® Value score of 61. Performance Food is a Best Buy.
Richard J. Moroney, CFA, Upside, www.upsidestocks.com, 800-233-5922, February 2019