Yahoo Finance Here's Why We Think Performance Food Group (NYSE:PFGC) Is Well Worth Watching
For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it currently lacks a track record of revenue and profit. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.
In contrast to all that, many investors prefer to focus on companies like Performance Food Group (NYSE:PFGC), which has not only revenues, but also profits. While this doesn't necessarily speak to whether it's undervalued, the profitability of the business is enough to warrant some appreciation - especially if its growing.
Check out our latest analysis for Performance Food Group
Performance Food Group's Improving Profits
Over the last three years, Performance Food Group has grown earnings per share (EPS) at as impressive rate from a relatively low point, resulting in a three year percentage growth rate that isn't particularly indicative of expected future performance. Thus, it makes sense to focus on more recent growth rates, instead. To the delight of shareholders, Performance Food Group's EPS soared from US$2.09 to US$2.70, over the last year. That's a impressive gain of 29%.
One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. Despite consistency in EBIT margins year on year, Performance Food Group has actually recorded a dip in revenue. While this may raise concerns, investors should investigate the reasoning behind this.
You can take a look at the company's revenue and earnings growth trend, in the chart below. Click on the chart to see the exact numbers.
While we live in the present moment, there's little doubt that the future matters most in the investment decision process. So why not check this interactive chart depicting future EPS estimates, for Performance Food Group?
Are Performance Food Group Insiders Aligned With All Shareholders?
Since Performance Food Group has a market capitalisation of US$11b, we wouldn't expect insiders to hold a large percentage of shares. But we are reassured by the fact they have invested in the company. Notably, they have an enviable stake in the company, worth US$223m. Investors will appreciate management having this amount of skin in the game as it shows their commitment to the company's future.
It's good to see that insiders are invested in the company, but are remuneration levels reasonable? Our quick analysis into CEO remuneration would seem to indicate they are. For companies with market capitalisations over US$8.0b, like Performance Food Group, the median CEO pay is around US$14m.
Performance Food Group offered total compensation worth US$9.5m to its CEO in the year to July 2023. That comes in below the average for similar sized companies and seems pretty reasonable. CEO compensation is hardly the most important aspect of a company to consider, but when it's reasonable, that gives a little more confidence that leadership are looking out for shareholder interests. Generally, arguments can be made that reasonable pay levels attest to good decision-making.
Is Performance Food Group Worth Keeping An Eye On?
For growth investors, Performance Food Group's raw rate of earnings growth is a beacon in the night. If you need more convincing beyond that EPS growth rate, don't forget about the reasonable remuneration and the high insider ownership. Everyone has their own preferences when it comes to investing but it definitely makes Performance Food Group look rather interesting indeed. However, before you get too excited we've discovered 1 warning sign for Performance Food Group that you should be aware of.
Although Performance Food Group certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see companies with more skin in the game, then check out this handpicked selection of companies that not only boast of strong growth but have strong insider backing.
Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.
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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.
