We recently compiled a list of the 7 Most Profitable Food Stocks To Invest In. In this article, we are going to take a look at where US Foods Holding Corp. (NYSE:USFD) stands against the other food stocks.
Exploring the Food Industry: Key Insights and Consumer Trends
The food industry plays a crucial role in the global economy, impacting everything from agriculture to retail. As the world population grows, food demand is increasing and driving changes in consumption patterns.
According to The Business Research Company, the global food and beverages market was valued at $6.57 trillion in 2023. Looking forward, the market is expected to grow at a compound annual growth rate (CAGR) of 5.9% during 2024-2028 to reach $8.81 trillion by the end of the forecast period. In 2023, Asia-Pacific was the largest region in the food and beverages market.
The rise of technology in food production is transforming how companies operate. Innovations like AI and robotics are streamlining supply chains and improving efficiency. Recent trends also highlight a shift towards healthier and functional foods that support overall well-being. For instance, many consumers are now looking for products that not only satisfy hunger but also promote health benefits, such as weight management and heart health.
In July 2024, Matter Communications shared insights from its 2024 Food & Beverage Trends survey, which surveyed over 1,000 US consumers about their food and beverage preferences. The findings highlight the significant influence of social media on consumer behavior, with 85% of respondents indicating they have either researched or purchased a product after seeing it posted by friends, family, or influencers. Additionally, 75% of those surveyed expressed a willingness to try viral food or beverage trends after seeing it on social media.
Consumers today are increasingly prioritizing healthier food options. According to the survey results, a significant majority, about 94%, believe that having access to healthier choices is essential when buying food and beverages. Among the nutritional features that shoppers value most, low sugar content ranks highest, followed closely by high protein and low carbohydrate options. This shift reflects a growing awareness of health and nutrition among consumers.
Additionally, the survey results show that many shoppers still prefer to purchase food in physical stores rather than online, with 56% indicating that they are more likely to buy in-store. Price also plays a crucial role in their decisions; 45% of consumers consider an affordable price to be the most important factor when selecting food and beverage products. As inflation continues to affect budgets, consumers are looking for options that provide both value and satisfaction without compromising their health goals.
As the market continues to evolve, understanding these trends will be essential for food companies aiming to remain competitive and relevant in a rapidly changing landscape.
Our Methodology
To compile our list of the 7 most profitable food stocks to invest in, we used the Finviz and Yahoo stock screeners to find the largest food companies. We also reviewed our own rankings and consulted various online resources.
Next, we focused on profitability. From this initial list of more than 20 food stocks, we narrowed our choices to stocks that had positive trailing twelve-month (TTM) net income and stocks that have grown their net income positively over the past 5 years.
To ensure the reliability of our findings, we consulted reputable sources such as SeekingAlpha, which provided insights into the net income CAGR over the past five years, and YCharts, which offered information on TTM net income.
Finally, from this list of the most profitable stocks that met our criteria, we focused on the top 7 food stocks most favored by institutional investors. Data for the hedge fund sentiment surrounding each stock was taken from Insider Monkey’s Q3 database of 900 elite hedge funds. The 7 most profitable food stocks to invest in are ranked in ascending order based on the number of hedge funds holding stakes in them as of Q3 2024.
Why do we care about what hedge funds do? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A loading dock filled with dry goods and frozen food being loaded onto a truck.
US Foods Holding Corp. (NYSE:USFD)
TTM Net Income: $575 Million
5-Year Net Income CAGR: 7.91%
Number of Hedge Fund Holders: 50
US Foods Holding Corp. (NYSE:USFD) is a leading food service distributor in the United States, serving around 250,000 restaurants and food service operators. The company offers a wide variety of food products, including frozen and dry foods, non-food products, and a comprehensive suite of e-commerce, technology, and business solutions.
In the third quarter of 2024, US Foods Holding Corp. (NYSE:USFD) reported a strong performance with net sales increasing by 6.8% to reach $9.7 billion. Total case volume also grew by 3.8%, with independent restaurant case volume rising by 4.1%. The company has successfully executed its strategy-driven operating model and leading digital solutions, resulting in continuous market share gains for 14 consecutive quarters with independent restaurants.
The company’s gross profit increased by 8.1% to $1.7 billion, reflecting effective pricing strategies and operational efficiencies. Notably, net income was $148 million, while adjusted EBITDA saw a significant increase of 13.2%, reaching $455 million. The company’s focus on digital solutions has enhanced its service offerings, including the MOXē platform that allows customers to manage orders and inventory seamlessly. Additionally, the introduction of a food cost calculator within MOXē now provides valuable insights to help customers optimize menu pricing and product selection.
The company has also been proactive in capital deployment, repurchasing $580 million worth of shares in the third quarter of 2024. Since starting its buyback program in late 2022, US Foods Holding Corp. (NYSE:USFD) has repurchased over $1.1 billion in shares, reflecting confidence in its valuation.
These initiatives and strong financial results position US Foods Holding Corp. (NYSE:USFD) as an attractive investment opportunity in the food sector, making it a compelling stock to consider for investors seeking growth potential. USFD has received a favorable outlook from analysts, who have a consensus buy rating for the stock. The 1-year median price target of $75.00 set by analysts indicates a potential upside of 12% from current levels.
Overall USFD ranks 3rd on our list of the most profitable food stocks to invest in. While we acknowledge the potential of USFD as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than USFD but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.