• If you have been wondering whether US Foods Holding is still reasonably priced after its recent run, this article walks through what the numbers actually say about its current value.
• The stock last closed at US$92.61, with returns of 0.5% over 7 days, 2.1% over 30 days, 24.1% year to date and 45.4% over the past year, while the 3 year and 5 year returns sit at 167.8% and 151.3% respectively.
• Recent attention on US Foods has been driven by ongoing interest in large foodservice distributors and how they are positioned within the broader consumer and hospitality supply chain. Investors have been weighing that context against the stock's strong multi year returns to assess whether current pricing still lines up with fundamentals.
• On our checklist of 6 valuation tests, US Foods Holding scores a 4 out of 6 for being undervalued. We will unpack this using several common valuation approaches before finishing with a more comprehensive way to think about what the stock could be worth.

Approach 1: US Foods Holding Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow, or DCF, model estimates what a company might be worth by projecting its future cash flows and discounting them back to today to account for risk and the time value of money.

For US Foods Holding, the model used is a 2 Stage Free Cash Flow to Equity approach. The latest twelve month Free Cash Flow is about $999.5 million. Analysts provide explicit Free Cash Flow estimates out to 2028, with Simply Wall St extrapolating further to build a 10 year path. By 2035, the projection used in the model is $1,891.0 million, with each future cash flow converted into today’s dollars before being summed.

On this basis, the DCF points to an estimated intrinsic value of about $155.67 per share, compared with the recent share price of $92.61. That implies the shares trade at a 40.5% discount to the DCF estimate, which flags US Foods Holding as undervalued under this method.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests US Foods Holding is undervalued by 40.5%. Track this in your watchlist or portfolio, or discover 47 more high quality undervalued stocks.

Approach 2: US Foods Holding Price vs Earnings

For a profitable company like US Foods Holding, the P/E ratio is a useful way to think about what you are paying for each dollar of earnings. Investors usually accept a higher P/E when they expect stronger earnings growth or see the business as lower risk, and prefer a lower P/E when growth looks more modest or risks feel higher.

US Foods currently trades on a P/E of 30.2x. That sits above the broader Consumer Retailing industry average of 20.7x, but very close to the peer group average of 30.9x. Simply Wall St also calculates a Fair Ratio of 32.5x. This Fair Ratio is a proprietary estimate of what a more tailored P/E might look like after considering factors such as US Foods’ earnings growth profile, profit margins, industry, market cap and risk characteristics.

Because the Fair Ratio folds in these company specific drivers, it can be a more informative guide than a simple comparison with peers or the industry alone. With the current P/E of 30.2x sitting below the Fair Ratio of 32.5x, the shares screen as undervalued on this metric.

Result: UNDERVALUED

P/E ratios tell one story, but what if the real opportunity lies elsewhere? Start investing in legacies, not executives. Discover our 18 top founder-led companies.

Upgrade Your Decision Making: Choose your US Foods Holding Narrative

Earlier we mentioned that there is an even better way to think about valuation. On Simply Wall St’s Community page you can build or follow a Narrative for US Foods Holding, which is essentially your story for the company linked to a concrete forecast for revenue, earnings and margins, and then to a Fair Value. As new information like earnings or news arrives, the Narrative updates automatically and lets you compare that Fair Value with the current share price to decide whether you see the stock as attractive or not. You can see how one investor might plug in the more optimistic assumptions that support a Fair Value of US$110.20, while another leans closer to the cautious end of the analyst range around US$82.00, all within the same easy to use framework.

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.