PFGC

We rate Performance Food Group Co (PFGC) as a Reduce with a composite score of 47.2/100 at a current price of $97.28. The quantitative profile shows weakness across multiple dimensions, suggesting limited upside potential and elevated risk of underperformance relative to peers over the next 12 months.

The rating is primarily driven by strength in stability (74th percentile) and momentum (56th percentile), which together account for the majority of the composite score. Offsetting weakness in investment (19th percentile) and value (27th percentile) tempers our overall conviction. We assign a No Moat rating (32/100), Medium uncertainty, and Poor capital allocation.

Key items to watch: balance sheet deleveraging progress; valuation compression risk if growth disappoints. Any material change in these dynamics could warrant a reassessment of our rating. The moat trend is stable, which suggests the competitive landscape is stable for now.

Performance Food Group Co holds a top-quartile position (#0 of 50) within the Wholesale Trade sector, based on our composite quantitative scoring across quality, value, momentum, and stability factors. The composite score of 47.2/100 places it at rank #2459 in our full 7,333-stock universe. With a $16.3B market capitalization, Performance Food Group Co operates at meaningful scale within the Wholesale Trade sector, providing competitive advantages in distribution, procurement, and customer reach.

Revenue is growing at 7%, though momentum at the 56th percentile suggests the market has not yet fully recognized this trajectory. This potential disconnect between fundamental improvement and market recognition could represent an opportunity for patient investors if the growth trend persists.

The margin cascade tells an important story: gross margins of 12% (-10.6pp vs sector) narrow to operating margins of 1% (-2.1pp vs sector) and net margins of 0.4%, yielding a gross-to-net conversion rate of 3%. The significant margin erosion from gross to net suggests elevated operating expenses, high interest costs, or other structural drags that warrant monitoring.

At a current price of $97.28, Performance Food Group Co is trading at a premium to fundamental value. Our value factor score of 27/100 reflects a composite assessment across multiple valuation metrics including price-to-earnings, price-to-book, EV/EBITDA, and price-to-sales ratios relative to both sector peers and the broader market. The premium valuation implies the market is pricing in significant future growth or quality improvements that are not yet fully reflected in current fundamentals.

The stock currently trades at a P/E of 60.0x (a 215% premium to the sector median of 19.1x), EV/EBITDA of 13.7x (at a premium), P/B of 3.3x, P/S of 0.2x. The above-sector P/E multiple suggests the market is pricing in superior growth or quality, which our analysis finds only partially justified by current fundamentals.

We assign a Medium uncertainty rating to Performance Food Group Co. The stock presents a balanced risk profile: significant leverage (113% debt-to-equity) and elevated valuation multiple (P/E 60.0x) that leaves limited margin for error. While not risk-free, the core business fundamentals are adequate to withstand moderate economic stress, and the range of potential outcomes around our fair value estimate is manageable.

Specific risk factors that inform our assessment include: significant leverage (113% debt-to-equity); elevated valuation multiple (P/E 60.0x) that leaves limited margin for error; the combination of leverage (113% D/E) and thin margins (0.4% net) amplifies downside risk. Each of these factors independently widens the distribution of potential outcomes, and in combination they create a risk profile that demands careful position sizing. The stability factor at the 74th percentile and quality factor at the 43th percentile provide a quantitative summary of the overall risk landscape.

Key risk mitigants include: above-average stability (74th percentile) suggests predictable business dynamics. These factors partially offset the identified risks and provide downside protection in adverse scenarios. On balance, the risk-reward profile is favorable for long-term investors.

We rate Performance Food Group Co's capital allocation as Poor. Key concerns include weak asset returns (ROA 1.4%). Exemplary capital allocators generate ROE above 20% and maintain conservative leverage — Performance Food Group Co significantly underperforms these benchmarks, raising questions about management's ability to create shareholder value.

Investors should scrutinize management's reinvestment decisions and balance sheet trajectory before committing capital. Poor capital allocation often compounds over time: overlevered balance sheets limit strategic flexibility, while low returns on capital destroy shareholder value. We would need to see sustained improvement in profitability metrics and balance sheet discipline before considering an upgrade.

In summary, Performance Food Group Co receives a Reduce rating with a composite score of 47.2/100 (rank #2459 of 7,333). Our quantitative framework assigns a No Moat (32/100, trend: stable), Medium uncertainty, and Poor capital allocation. The average factor score across quality, value, momentum, stability, and investment is 44/100.

Our analysis does not support a constructive view on Performance Food Group Co at this time. The combination of limited competitive advantages, medium uncertainty, and poor capital allocation suggests unfavorable risk-reward at current levels. We recommend investors avoid new positions and existing holders consider reducing exposure.