As reflected at the current price of $35, what future Chefs’ Warehouse operating performance is the market anticipating? To achieve average annual stock market performance of 9.0% over the next 6 years, Chefs’ Warehouse shares will need to reach $59. Upper quartile performance will require a $70 Chefs’ Warehouse stock price by 2029.
Executive Summary
- Chefs’ Warehouse important characteristics: high expected growth, instability, average profitability, and below average financial strength. A big positive influence on Chefs’ Warehouse valuation is its superior Growth.
- Very high valuation, lagging shareholder returns. Current valuation levels are very high relative to the Chefs’ Warehouse Peer Group. Recent market returns have substantially underperformed the Chefs’ Warehouse Peer Group. Total shareholder returns expected to seriously lag the overall equity market. Based on current investor expectations, Chefs’ Warehouse shares should reach a level of $52 by 2029 — an 6.6% per year total shareholder return. A 2029 stock price of $59 would reflect median performance and a price of $70 would be required to reach upper quartile performance.
- Growth has been Chefs’ Warehouse biggest valuation strength. Historical growth has been very high relative to the Chefs’ Warehouse Peer Group and forecasted growth is relatively very high. Asset Growth, and Revenue Growth have been superior. These factors have buoyed market perceptions of Chefs’ Warehouse. Chefs’ Warehouse historical income statement growth has been higher than growth in the balance sheet. Revenue growth has exceeded asset growth; earnings growth has exceeded equity growth resulting in an improving return on equity.
- Asset Turnover is group leading. This factor has strengthened market perceptions of Chefs’ Warehouse. The company has normal cash needs.
- Chefs’ Warehouse risk profile is neutral. Overall variability has been only average with only average revenue variability, very low E.P.S. variability, and very high stock price volatility. Financial Strength is only average and earnings’ expectations are relatively high. The debt/capital ratio has risen.
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