Linked here’s a detailed quantitative evaluation of Sysco Corporation (SYY). Beneath are some highlights from the above linked evaluation:
Firm Description: Sysco Company is a big distributor of meals and associated merchandise, primarily to the foodservice or food-away-from-home business.
Fair Value: In calculating truthful worth, I contemplate the NPV MMA Differential Honest Worth together with these 4 calculations of truthful worth, see web page 2 of the linked PDF for an in depth description:
1. Avg. Excessive Yield Worth
2. 20-12 months DCF Worth
3. Avg. P/E Worth
4. Graham Quantity
SYY is buying and selling at a reduction to solely 3.) above. Since SYY’s tangible e book worth will not be significant, a Graham quantity can’t be calculated. When additionally contemplating the NPV MMA Differential, the inventory is buying and selling at a 63.4% premium to its calculated truthful worth of $46.35. SYY didn’t earn any Stars on this part.
Dividend Analytical Data: On this part there are three doable Stars and three key metrics, see web page 2 of the linked PDF for an in depth description:
1. Free Money Circulation Payout
2. Debt To Whole Capital
3. Key Metrics
4. Dividend Progress Charge
5. Years of Div. Progress
6. Rolling 4-yr Div. > 15%
SYY earned one Star on this part for 1.) above. A Star was earned because the Free Money Circulation payout ratio was lower than 60% and there have been no unfavourable Free Money Flows over the past 10 years. The corporate has paid a money dividend to shareholders yearly since 1970 and has elevated its dividend funds for 52 consecutive years.
Dividend Income vs. MMA: Why would you assume the fairness danger and put money into a dividend inventory in case you may earn a greater return in a a lot much less dangerous cash market account (MMA) or Treasury bond? This part compares the incomes means of this inventory with a high yield MMA. Two objects are thought of on this part, see web page 2 of the linked PDF for an in depth description:
1. NPV MMA Diff.
2. Years to > MMA
The unfavourable NPV MMA Diff. signifies that on a NPV foundation the dividend earnings from an funding in SYY can be lower than an analogous quantity invested in MMA incomes a 20-year common charge of three.75%. If SYY grows its dividend at 3.1% per yr, it can by no means equal a MMA yielding an estimated 20-year common charge of three.75%.
Friends: The corporate’s peer group contains: G. Willi Meals-Worldwide Ltd. (WILC) with a 9.9% yield and United Pure Meals, Inc. (UNFI) with a 0.0% yield.
Conclusion: SYY didn’t earn any Stars within the Honest Worth part, earned one Star within the Dividend Analytical Information part and didn’t earn any Stars within the Dividend Revenue vs. MMA part for a complete of 1 Star. This quantitatively ranks SYY as a 1-Star Very Weak inventory.
Utilizing my D4L-PreScreen.xls mannequin, I made up my mind the share worth would wish to lower to $48.46 earlier than SYY’s NPV MMA Differential elevated to the $500 minimal that I search for in a inventory with 52 years of consecutive dividend will increase. At that worth the inventory would yield 4.1%.
Resetting the D4L-PreScreen.xls mannequin and fixing for the dividend development charge wanted to generate the goal $500 NPV MMA Differential, the calculated charge is 7.6%. This dividend development charge is larger than the three.1% used on this evaluation, thus offering no margin of security. SYY has a risk rating of 1.75 which classifies it as a Medium danger inventory.
SYY operates in a comparatively secure business and has the biggest market share in america and Canada. SYY has developed an in depth distribution community that no different competitor has been in a position to replicate. SYY consults with its clients on how they’ll drive gross sales and reduce prices.
The inventory is buying and selling above my truthful worth worth of $46.35. Its debt to complete capital of 84% (down from 91%) is above my most stage. Nonetheless, its free money circulation payout of fifty% (down from 87%) is effectively under my maximun stage of 60%. I’ll proceed to attend till the SYY’s dividend fundamentals enhance earlier than including to my place.
Disclaimer: Materials offered right here is for informational functions solely. The above quantitative inventory evaluation, together with the Star score, is mechanically calculated and is predicated on historic info. The evaluation assumes the inventory will carry out sooner or later because it has prior to now. That is usually by no means true. Earlier than shopping for or promoting any inventory you ought to do your personal analysis and attain your personal conclusion. See my Disclaimer for extra info.
Full Disclosure: On the time of this writing, I used to be lengthy in SYY (1.4% of my Dividend Progress Portfolio).
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Tags: SYY, WILC, SPTN, UNFI,
