Sysco Corp Valuation – March 2019 $SYY

Company Profile (excerpt from Reuters): Sysco Corporation (Sysco), incorporated on May 8, 1969, is a distributor of food and related products primarily to the foodservice or food-away-from-home industry. The Company’s segments include Broadline, SYGMA and Other. The Company’s Broadline segment is an aggregation of its Broadline operations located in the Bahamas, Canada, Costa Rica, Ireland, Mexico and the United States. Broadline operating companies distribute a full line of food products and a range of non-food products to both traditional and chain restaurant customers, hospitals, schools, hotels, industrial caterers and other venues where foodservice products are served. SYGMA operating companies distribute a full line of food products and a range of non-food products to certain chain restaurant customer locations. The Other segment includes the Company’s specialty produce; custom-cut meat operations; lodging industry segments; a company that distributes specialty imported products; a company that distributes to international customers, and Sysco Ventures platform, which includes a suite of technology solutions that help in supporting the business needs of Sysco’s customers. The Company operates through its subsidiaries and divisions.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of SYY – March 2019

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $34,689,559,026 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.25 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 32.99% Fail
6. Moderate PEmg Ratio PEmg < 20 27.79 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 16.09 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.25 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 4.75 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $2.43
MG Growth Estimate 8.95%
MG Value $64.19
Opinion Fairly Valued
MG Grade C
MG Value based on 3% Growth $35.25
MG Value based on 0% Growth $20.67
Market Implied Growth Rate 9.64%
Current Price $67.56
% of Intrinsic Value 105.24%

SYSCO Corporation does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings growth over the last ten years, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the current assets. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $1.52 in 2015 to an estimated $2.43 for 2019. This level of demonstrated earnings growth supports the market’s implied estimate of 9.64% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value within a margin of safety relative to the price.

At the time of valuation, further research into SYSCO Corporation revealed the company was trading above its Graham Number of $18.03. The company pays a dividend of $1.41 per share, for a yield of 2.1%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 27.79, which was above the industry average of 26.89. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-14.4.

SYSCO Corporation receives an average overall rating in the ModernGraham grading system, scoring a C.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$14.40
Graham Number $18.03
PEmg 27.79
Current Ratio 1.25
PB Ratio 16.09
Current Dividend $1.41
Dividend Yield 2.09%
Number of Consecutive Years of Dividend Growth 20

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $8,437,783,000
Total Current Liabilities $6,750,170,000
Long-Term Debt $8,019,846,000
Total Assets $18,194,176,000
Intangible Assets $4,775,912,000
Total Liabilities $15,991,183,000
Shares Outstanding (Diluted Average) 524,601,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.00
Jun2018 $2.70
Jun2017 $2.08
Jun2016 $1.64
Jun2015 $1.15
Jun2014 $1.58
Jun2013 $1.67
Jun2012 $1.90
Jun2011 $1.96
Jun2010 $1.99
Jun2009 $1.77
Jun2008 $1.81
Jun2007 $1.60
Jun2006 $1.36
Jun2005 $1.47
Jun2004 $1.37
Jun2003 $1.18
Jun2002 $1.01
Jun2001 $0.88
Jun2000 $0.67
Jun1999 $0.54

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.43
Jun2018 $2.04
Jun2017 $1.68
Jun2016 $1.52
Jun2015 $1.52
Jun2014 $1.75
Jun2013 $1.84
Jun2012 $1.91
Jun2011 $1.89
Jun2010 $1.80
Jun2009 $1.67
Jun2008 $1.59
Jun2007 $1.45
Jun2006 $1.34
Jun2005 $1.28
Jun2004 $1.14
Jun2003 $0.96

Recommended Reading:

Other ModernGraham posts about the company

Sysco Corp Valuation – May 2018 $SYY
Sysco Corporation Valuation – January 2017 $SYY
Sysco Corporation Analysis – September 2015 Update $SYY
21 Companies in the Spotlight This Week – 5/9/15
Sysco Corporation Quarterly Valuation – May 2015 $SYY

Other ModernGraham posts about related companies

General Mills Inc Valuation – February 2019 $GIS
McCormick & Co Valuation – February 2019 $MKC
Archer-Daniels Midland Co Valuation – February 2019 $ADM
Conagra Brands Inc Valuation – February 2019 $CAG
Monster Beverage Corp Valuation – February 2019 $MNST
Campbell Soup Co Valuation – January 2019 $CPB
Kellogg Co Valuation – January 2019 $K
PepsiCo Inc Valuation – January 2019 $PEP
The Hershey Co Valuation – January 2019 $HSY
Coca-Cola Co Valuation – November 2018 $KO

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Sysco Corp Valuation – May 2018 $SYY

Company Profile (excerpt from Reuters): Sysco Corporation (Sysco), incorporated on May 8, 1969, is a distributor of food and related products primarily to the foodservice or food-away-from-home industry. The Company’s segments include Broadline, SYGMA and Other. The Company’s Broadline segment is an aggregation of its Broadline operations located in the Bahamas, Canada, Costa Rica, Ireland, Mexico and the United States. Broadline operating companies distribute a full line of food products and a range of non-food products to both traditional and chain restaurant customers, hospitals, schools, hotels, industrial caterers and other venues where foodservice products are served. SYGMA operating companies distribute a full line of food products and a range of non-food products to certain chain restaurant customer locations. The Other segment includes the Company’s specialty produce; custom-cut meat operations; lodging industry segments; a company that distributes specialty imported products; a company that distributes to international customers, and Sysco Ventures platform, which includes a suite of technology solutions that help in supporting the business needs of Sysco’s customers. The Company operates through its subsidiaries and divisions.

SYY Chart

SYY data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of SYY – May 2018

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $33,072,896,304 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.38 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 10.66% Fail
6. Moderate PEmg Ratio PEmg < 20 31.56 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 14.75 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.38 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 3.63 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $2.01
MG Growth Estimate 2.28%
MG Value $26.27
Opinion Overvalued
MG Grade C-
MG Value based on 3% Growth $29.16
MG Value based on 0% Growth $17.10
Market Implied Growth Rate 11.53%
Current Price $63.48
% of Intrinsic Value 241.68%

SYSCO Corporation does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings growth over the last ten years, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the current assets. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $1.75 in 2014 to an estimated $2.01 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 11.53% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into SYSCO Corporation revealed the company was trading above its Graham Number of $16.15. The company pays a dividend of $1.3 per share, for a yield of 2% Its PEmg (price over earnings per share – ModernGraham) was 31.56, which was above the industry average of 31.56. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-14.56.

SYSCO Corporation receives an average overall rating in the ModernGraham grading system, scoring a C-.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$14.56
Graham Number $16.15
PEmg 31.56
Current Ratio 1.38
PB Ratio 14.75
Current Dividend $1.30
Dividend Yield 2.05%
Number of Consecutive Years of Dividend Growth 20

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2017
Total Current Assets $8,272,168,000
Total Current Liabilities $5,982,970,000
Long-Term Debt $8,312,489,000
Total Assets $18,219,370,000
Intangible Assets $5,057,355,000
Total Liabilities $15,950,768,000
Shares Outstanding (Diluted Average) 527,250,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.61
Jun2017 $2.08
Jun2016 $1.64
Jun2015 $1.15
Jun2014 $1.58
Jun2013 $1.67
Jun2012 $1.90
Jun2011 $1.96
Jun2010 $1.99
Jun2009 $1.77
Jun2008 $1.81
Jun2007 $1.60
Jun2006 $1.36
Jun2005 $1.47
Jun2004 $1.37
Jun2003 $1.18
Jun2002 $1.01
Jun2001 $0.88
Jun2000 $0.67
Jun1999 $0.54
Jun1998 $0.43

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.01
Jun2017 $1.68
Jun2016 $1.52
Jun2015 $1.52
Jun2014 $1.75
Jun2013 $1.84
Jun2012 $1.91
Jun2011 $1.89
Jun2010 $1.80
Jun2009 $1.67
Jun2008 $1.59
Jun2007 $1.45
Jun2006 $1.34
Jun2005 $1.28
Jun2004 $1.14
Jun2003 $0.96
Jun2002 $0.81

Recommended Reading:

Other ModernGraham posts about the company

Sysco Corporation Valuation – January 2017 $SYY
Sysco Corporation Analysis – September 2015 Update $SYY
21 Companies in the Spotlight This Week – 5/9/15
Sysco Corporation Quarterly Valuation – May 2015 $SYY
58 Companies in the Spotlight This Week – 1/31/15

Other ModernGraham posts about related companies

Archer-Daniels Midland Co Valuation – May 2018 $ADM
Conagra Brands Inc Valuation – May 2018 $CAG
McCormick & Co Inc Valuation – May 2018 $MKC
Monster Beverage Corp Valuation – April 2018 $MNST
Campbell Soup Co Valuation – March 2018 $CPB
Kellogg Company Valuation – March 2018 $K
Hershey Co Valuation – March 2018 $HSY
PepsiCo Inc Valuation – March 2018 $PEP
The Coca-Cola Co Valuation – February 2018 $KO
Campbell Soup Company Valuation – September 2017 $CPB

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Sysco Corporation Valuation – January 2017 $SYY

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Stocks for Using A Benjamin Graham Value Investing Strategy – January 2017.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Sysco Corporation (SYY) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Sysco Corporation (Sysco) is a distributor of food and related products primarily to the foodservice or food-away-from-home industry. The Company’s segments include Broadline, SYGMA and Other. The Broadline segment includes its Broadline operations located in the Bahamas, Canada, Costa Rica, Ireland, Mexico and the United States. Broadline operating companies distribute a full line of food products and a range of non-food products to both traditional and chain restaurant customers, hospitals, schools, hotels, industrial caterers and other venues where foodservice products are served. SYGMA operating companies distribute a full line of food products and a range of non-food products to certain chain restaurant customer locations. The Other segment includes the Company’s specialty produce; custom-cut meat operations; lodging industry segments; a company that distributes specialty imported products; a company that distributes to international customers, and Sysco Ventures platform.

SYY Chart

SYY data by YCharts

[level-free]
To read the details of this valuation, you must be logged in as a premium member. If you are not a premium member, please consider becoming one.

Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. Recent valuations of the components of the Dow Jones Industrial Average are available for free members, including this one of Microsoft Corporation.  In addition, here is a post detailing what can be found within each individual company’s valuation.

[/level-free]
[not-level-free]

Downloadable PDF version of this valuation:

ModernGraham Valuation of SYY – January 2017

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

 

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $29,014,701,918 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.52 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -6.82% Fail
6. Moderate PEmg Ratio PEmg < 20 29.65 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 9.85 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.52 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 2.83 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Fail

Stage 2: Determination of Intrinsic Value

EPSmg $1.79
MG Growth Estimate -0.40%
MG Value $13.77
Opinion Overvalued
MG Grade C-
MG Value based on 3% Growth $25.95
MG Value based on 0% Growth $15.21
Market Implied Growth Rate 10.57%
Current Price $53.05
% of Intrinsic Value 385.28%

SYSCO Corporation does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings growth over the last ten years, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the net current assets, and the lack of earnings growth over the last five years. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $1.84 in 2013 to an estimated $1.79 for 2017. This level of demonstrated earnings growth does not support the market’s implied estimate of 10.57% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into SYSCO Corporation revealed the company was trading above its Graham Number of $17.2. The company pays a dividend of $1.24 per share, for a yield of 2.3%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 29.65, which was above the industry average of 24.74. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-12.24.

SYSCO Corporation receives an average overall rating in the ModernGraham grading system, scoring a C-.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$12.24
Graham Number $17.20
PEmg 29.65
Current Ratio 1.52
PB Ratio 9.85
Current Dividend $1.24
Dividend Yield 2.34%
Number of Consecutive Years of Dividend Growth 20

[/not-level-free]

Useful Links:

 

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2016
Total Current Assets $8,135,470,000
Total Current Liabilities $5,366,550,000
Long-Term Debt $7,843,517,000
Total Assets $18,024,810,000
Intangible Assets $5,019,562,000
Total Liabilities $15,004,024,000
Shares Outstanding (Diluted Average) 560,954,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.40
Jun2016 $1.64
Jun2015 $1.15
Jun2014 $1.58
Jun2013 $1.67
Jun2012 $1.90
Jun2011 $1.96
Jun2010 $1.99
Jun2009 $1.77
Jun2008 $1.81
Jun2007 $1.60
Jun2006 $1.36
Jun2005 $1.47
Jun2004 $1.37
Jun2003 $1.18
Jun2002 $1.01
Jun2001 $0.88
Jun2000 $0.67
Jun1999 $0.54
Jun1998 $0.43
Jun1997 $0.43

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.79
Jun2016 $1.52
Jun2015 $1.52
Jun2014 $1.75
Jun2013 $1.84
Jun2012 $1.91
Jun2011 $1.89
Jun2010 $1.80
Jun2009 $1.67
Jun2008 $1.59
Jun2007 $1.45
Jun2006 $1.34
Jun2005 $1.28
Jun2004 $1.14
Jun2003 $0.96
Jun2002 $0.81
Jun2001 $0.67

Recommended Reading:

Other ModernGraham posts about the company

Sysco Corporation Analysis – September 2015 Update $SYY
21 Companies in the Spotlight This Week – 5/9/15
Sysco Corporation Quarterly Valuation – May 2015 $SYY
58 Companies in the Spotlight This Week – 1/31/15
Sysco Corporation Quarterly Valuation – January 2015 $SYY

Other ModernGraham posts about related companies

General Mills Inc Valuation – January 2017 $GIS
Coca-Cola European Partners PLC Valuation – January 2017 $CCE
Archer Daniels Midland Company Valuation – January 2017 $ADM
McCormick & Company Valuation – January 2017 $MKC
Conagra Brands Inc Valuation – December 2016 $CAG
Seneca Foods Corp Valuation – Initial Coverage $SENEA
Ingredion Inc Valuation – Initial Coverage $INGR
Saputo Inc Valuation – Initial Coverage $SAP
Best Stocks to Invest In: the Food Processing Industry – August 2016
B&G Foods Inc Valuation – August 2016 $BGS

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Sysco Corporation Analysis – September 2015 Update $SYY

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Most Undervalued Companies for the Defensive Investor – August 2015.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Sysco Corporation (SYY) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Sysco Corporation (Sysco) along with its subsidiaries and divisions, is a North American distributor of food and related products primarily to the foodservice or food-away-from-home industry. The Company provides products and related services to approximately 425,000 customers, including restaurants, healthcare and educational facilities, lodging establishments and other foodservice customers. Sysco provides food and related products to the foodservice or food-away-from-home industry. The Company has aggregated its operating companies into a number of segments, of which only Broadline and SYGMA are the main segments. Broadline operating companies distribute a line of food products and a variety of non-food products to their customers. SYGMA operating companies distribute a line of food products and a variety of non-food products to chain restaurant customer locations. The Company’s other segments include its specialty produce, custom-cut meat and lodging industry products segments.

[level-free]

To read the details of this valuation, you must be logged in as a premium member. If you are not a premium member, please consider becoming one.

Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. Here is a free sample valuation pdf, and here is a post detailing what can be found within each individual company’s valuation.

[/level-free]
[level-mg-stocks-screens-subscriber]

Downloadable PDF version of this valuation:

ModernGraham Valuation of SYY – September 2015

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end Fail
6. Moderate PEmg Ratio PEmg < 20 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 Fail
Score
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Fail

Stage 2: Determination of Intrinsic Value

EPSmg $1.58
MG Growth Estimate -2.63%
MG Value $5.10
Opinion Overvalued
MG Value based on 3% Growth $22.84
MG Value based on 0% Growth $13.39
Market Implied Growth Rate 8.47%
Current Price $40.07
% of Intrinsic Value 786.31%

Sysco Corporation does not qualify for either the Enterprising Investor or the more conservative Defensive Investor.  The Defensive Investor is concerned with the low current ratio, insufficient earnings growth over the last ten years, and the high PEmg and PB ratios.  The Enterprising Investor is concerned with the low current ratio and the lack of earnings growth over the last five years.  As a result, all value investors following the ModernGraham approach based on Benjamin Graham’s methods should explore other opportunities or proceed with a cautious speculative attitude.

As for a valuation, the company appears to be overvalued after seeing its EPSmg (normalized earnings) decline from $1.91 in 2012 to an estimated $1.58 for 2016.  This level of demonstrated earnings growth does not support the market’s implied estimate of 8.47% annual earnings growth over the next 7-10 years.  As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value below the price.

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on Sysco Corporation (SYY)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Stage 3: Information for Further Research

SYY Charts September 2015

Net Current Asset Value (NCAV) -$2.06
Graham Number $18.91
PEmg 25.44
Current Ratio 1.22
PB Ratio 4.56
Dividend Yield 2.97%
Number of Consecutive Years of Dividend Growth 20

 

[/level-mg-stocks-screens-subscriber]

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Total Current Assets $11,494,300,000
Total Current Liabilities $9,399,615,000
Long-Term Debt $2,271,825,000
Total Assets $17,989,280,000
Intangible Assets $2,114,625,000
Total Liabilities $12,729,060,000
Shares Outstanding (Diluted Average) 599,255,000

Earnings Per Share History

Next Fiscal Year Estimate $1.81
Jun15 $1.15
Jun14 $1.58
Jun13 $1.67
Jun12 $1.90
Jun11 $1.96
Jun10 $1.99
Jun09 $1.77
Jun08 $1.81
Jun07 $1.60
Jun06 $1.36
Jun05 $1.47
Jun04 $1.37
Jun03 $1.18
Jun02 $1.01
Jun01 $0.88
Jun00 $0.67
Jun99 $0.54
Jun98 $0.43
Jun97 $0.43
Jun96 $0.38

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $1.58
Jun15 $1.52
Jun14 $1.75
Jun13 $1.84
Jun12 $1.91
Jun11 $1.89
Jun10 $1.80
Jun09 $1.67
Jun08 $1.59
Jun07 $1.45
Jun06 $1.34
Jun05 $1.28
Jun04 $1.14
Jun03 $0.96
Jun02 $0.81
Jun01 $0.66
Jun00 $0.53

Recommended Reading:

Other ModernGraham posts about the company

21 Companies in the Spotlight This Week – 5/9/15
Sysco Corporation Quarterly Valuation – May 2015 $SYY
58 Companies in the Spotlight This Week – 1/31/15
Sysco Corporation Quarterly Valuation – January 2015 $SYY
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Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to read our full disclaimer.

 

Sysco Corporation Quarterly Valuation – May 2015 $SYY

Sysco_Logo.svgBenjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 5 Most Undervalued Companies for the Defensive Investor – April 2015.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a specific look at how Sysco Corporation (SYY) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Sysco Corporation (Sysco) along with its subsidiaries and divisions, is a North American distributor of food and related products primarily to the foodservice or food-away-from-home industry. The Company provides products and related services to approximately 425,000 customers, including restaurants, healthcare and educational facilities, lodging establishments and other foodservice customers. Sysco provides food and related products to the foodservice or food-away-from-home industry. The Company has aggregated its operating companies into a number of segments, of which only Broadline and SYGMA are the main segments. Broadline operating companies distribute a line of food products and a variety of non-food products to their customers. SYGMA operating companies distribute a line of food products and a variety of non-food products to chain restaurant customer locations. The Company’s other segments include its specialty produce, custom-cut meat and lodging industry products segments.

Defensive Investor – must pass at least 6 of the following 7 tests: Score = 4/7

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion – PASS
  2. Sufficiently Strong Financial Condition – current ratio greater than 2 – PASS
  3. Earnings Stability – positive earnings per share for at least 10 straight years – PASS
  4. Dividend Record – has paid a dividend for at least 10 straight years – PASS
  5. Earnings Growth – earnings per share has increased by at least 1/3 over the last 10 years using 3 year averages at beginning and end of period – FAIL
  6. Moderate PEmg ratio – PEmg is less than 20 – FAIL
  7. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – FAIL

Enterprising Investor – must pass at least 4 of the following 5 tests or be suitable for a defensive investor: Score = 4/5

  1. Sufficiently Strong Financial Condition, Part 1 – current ratio greater than 1.5 – PASS
  2. Sufficiently Strong Financial Condition, Part 2 – Debt to Net Current Assets ratio less than 1.1 – PASS
  3. Earnings Stability – positive earnings per share for at least 5 years – PASS
  4. Dividend Record – currently pays a dividend – PASS
  5. Earnings growth – EPSmg greater than 5 years ago – FAIL

Valuation Summary

Key Data:

Recent Price $36.61
MG Value $7.60
MG Opinion Overvalued
Value Based on 3% Growth $23.82
Value Based on 0% Growth $13.96
Market Implied Growth Rate 6.89%
Net Current Asset Value (NCAV) -$1.92
PEmg 22.29
Current Ratio 2.65
PB Ratio 4.13

Balance Sheet – March 2015

Current Assets $11,521,000,000
Current Liabilities $4,340,000,000
Total Debt $7,275,000,000
Total Assets $17,984,000,000
Intangible Assets $2,088,000,000
Total Liabilities $12,671,000,000
Outstanding Shares 598,900,000

Earnings Per Share

2015 (estimate) $1.51
2014 $1.58
2013 $1.67
2012 $1.90
2011 $1.96
2010 $1.99
2009 $1.77
2008 $1.81
2007 $1.60
2006 $1.36
2005 $1.47

Earnings Per Share – ModernGraham

2015 (estimate) $1.64
2014 $1.75
2013 $1.84
2012 $1.91
2011 $1.89
2010 $1.80

Dividend History

Conclusion:

Sysco Corporation is suitable for the Enterprising Investor but not for the Defensive Investor.  The Defensive Investor is concerned by the low earnings growth over the last ten years, and the high PEmg and PB ratios, while the Enterprising Investor is concerned with the lack of earnings growth over the last five years.  As a result, Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel very comfortable proceeding with further research and comparing the company to other opportunities.  From a valuation side of things, the company appears to be overvalued after seeing its EPSmg (normalized earnings) drop from $1.89 in 2011 to only an estimated $1.64 for 2015.  This level of demonstrated growth does not support the market’s implied estimate of 6.89% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value below the price.

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on Sysco Corporation (SYY)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Disclaimer:  The author did not hold a position in Sysco Corporation (SYY) or in any other company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  Logo taken from Wikipedia for the sole purpose of identifying the company; this article is not affiliated with the company in any manner.

Sysco Corporation Quarterly Valuation – January 2015 $SYY

Sysco_Logo.svg

Sysco Corporation is suitable for the Enterprising Investor, but not the Defensive Investor, who is concerned with the low current ratio, lack of sufficient earnings growth over the last ten years, and the high PEmg and PB ratios. The Enterprising Investor, on the other hand, is only concerned with the lack of earnings growth over the last five years. As a result, the Enterprising Investor should feel very comfortable proceeding to the next part of the analysis, which is a determination of the company’s intrinsic value.

From a valuation side of things, the company has seen its EPSmg (normalized earnings) drop from $1.89 in 2011 to only an estimated $1.74 for 2015. This demonstrated growth does not support the market’s implied estimate of 7.28%. The company would have to see a significant change in its level of growth in order to meet the market’s estimated growth level. As a result, the ModernGraham valuation model returns an estimate of intrinsic value below the market price at this time, and the company appears to be overvalued by the market.

Be sure to check out previous ModernGraham valuations of Sysco Corporation (SYY) for greater perspective!

Read the full valuation on Seeking Alpha!

SYY Chart

SYY data by YCharts

Disclaimer:  The author did not hold a position in Sysco Corporation (SYY) at the time of publication and had no intention of changing that position within the next 72 hours.  Logo taken from Wikipedia for the sole purpose of identifying the company; this article is not affiliated with the company in any manner.

Sysco Corporation Quarterly Stock Valuation – October 2014 $SYY

Sysco_Logo.svgBenjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 5 Highest Dividend Yields Among Undervalued Companies for the Defensive Investor – September 2014.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a specific look at how Sysco Corporation (SYY) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Sysco Corporation (Sysco), along with its subsidiaries and divisions, is a North American distributor of food and related products primarily to the foodservice or food-away-from-home industry. The Company provides products and related services to approximately 425,000 customers, including restaurants, healthcare and educational facilities, lodging establishments and other foodservice customers. Sysco provides food and related products to the foodservice or food-away-from-home industry. The Company has aggregated its operating companies into a number of segments, of which only Broadline and SYGMA are the main segments. Broadline operating companies distribute a line of food products and a variety of non-food products to their customers. SYGMA operating companies distribute a line of food products and a variety of non-food products to chain restaurant customer locations. On October 3, 2012, the Company acquired Keelings Foods.
SYY Chart

SYY data by YCharts

Defensive Investor – must pass at least 6 of the following 7 tests: Score = 3/7

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion – PASS
  2. Sufficiently Strong Financial Condition – current ratio greater than 2 – FAIL
  3. Earnings Stability – positive earnings per share for at least 10 straight years – PASS
  4. Dividend Record – has paid a dividend for at least 10 straight years – PASS
  5. Earnings Growth – earnings per share has increased by at least 1/3 over the last 10 years using 3 year averages at beginning and end of period – FAIL
  6. Moderate PEmg ratio – PEmg is less than 20 – FAIL
  7. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – FAIL

Enterprising Investor – must pass at least 4 of the following 5 tests or be suitable for a defensive investor: Score = 5/5

  1. Sufficiently Strong Financial Condition, Part 1 – current ratio greater than 1.5 – PASS
  2. Sufficiently Strong Financial Condition, Part 2 – Debt to Net Current Assets ratio less than 1.1 – PASS
  3. Earnings Stability – positive earnings per share for at least 5 years – PASS
  4. Dividend Record – currently pays a dividend – PASS
  5. Earnings growth – EPSmg greater than 5 years ago – PASS

Valuation Summary

Key Data:

Recent Price $37.70
MG Value $15.90
MG Opinion Overvalued
Value Based on 3% Growth $26.33
Value Based on 0% Growth $15.44
Market Implied Growth Rate 6.13%
Net Current Asset Value (NCAV) -$2.08
PEmg 20.76
Current Ratio 1.53
PB Ratio 4.20

Balance Sheet – 6/28/2014

Current Assets $6,682,000,000
Current Liabilities $4,367,600,000
Total Debt $2,384,200,000
Total Assets $13,168,000,000
Intangible Assets $2,127,900,000
Total Liabilities $7,901,300,000
Outstanding Shares 586,100,000

Earnings Per Share

2014 (estimate) $1.79
2013 $1.67
2012 $1.90
2011 $1.96
2010 $1.99
2009 $1.77
2008 $1.81
2007 $1.60
2006 $1.35
2005 $1.47
2004 $1.37

Earnings Per Share – ModernGraham

2014 (estimate) $1.82
2013 $1.84
2012 $1.91
2011 $1.89
2010 $1.80
2009 $1.67

Dividend History
SYY Dividend Chart

SYY Dividend data by YCharts

Conclusion:

Sysco Corporation is suitable for the Enterprising Investor but not the Defensive Investor.  The Defensive Investor is concerned with the poor current ratio, the lack of earnings growth over the last ten years, and the high PEmg and PB ratios.  The Enterprising Investor has no initial concerns.  As a result, Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with research into the company and comparing it to other opportunities. From a valuation side of things, the company appears to be overvalued after growing its EPSmg (normalized earnings) from $1.80 in 2010 to only an estimated $1.82 for 2014.  This level of demonstrated growth does not support the market’s implied estimate of 6.13% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value below the price.

Be sure to check out the previous ModernGraham valuations of Sysco Corporation (SYY) for more perspective!

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on Sysco Corporation (SYY)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Disclaimer:  The author did not hold a position in Sysco Corporation (SYY) or in any other company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  Logo taken from Wikipedia for the sole purpose of identifying the company; this article is not affiliated with the company in any manner.

Sysco Corporation Quarterly Valuation – July 2014 $SYY

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 5 Highest Dividend Yields Among Undervalued Companies for the Enterprising Investor.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a specific look at how Sysco Corporation (SYY) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Sysco Corporation (Sysco), along with its subsidiaries and divisions, is a North American distributor of food and related products primarily to the foodservice or food-away-from-home industry. The Company provides products and related services to approximately 425,000 customers, including restaurants, healthcare and educational facilities, lodging establishments and other foodservice customers. Sysco provides food and related products to the foodservice or food-away-from-home industry. The Company has aggregated its operating companies into a number of segments, of which only Broadline and SYGMA are the main segments. Broadline operating companies distribute a line of food products and a variety of non-food products to their customers. SYGMA operating companies distribute a line of food products and a variety of non-food products to chain restaurant customer locations. On October 3, 2012, the Company acquired Keelings Foods. SYY Chart

SYY data by YCharts

Defensive Investor – must pass at least 6 of the following 7 tests: Score = 3/7

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion – PASS
  2. Sufficiently Strong Financial Condition – current ratio greater than 2 – FAIL
  3. Earnings Stability – positive earnings per share for at least 10 straight years – PASS
  4. Dividend Record – has paid a dividend for at least 10 straight years – PASS
  5. Earnings Growth – earnings per share has increased by at least 1/3 over the last 10 years using 3 year averages at beginning and end of period – FAIL
  6. Moderate PEmg ratio – PEmg is less than 20 – FAIL
  7. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – FAIL

Enterprising Investor – must pass at least 4 of the following 5 tests or be suitable for a defensive investor: Score = 4/5

  1. Sufficiently Strong Financial Condition, Part 1 – current ratio greater than 1.5 – PASS
  2. Sufficiently Strong Financial Condition, Part 2 – Debt to Net Current Assets ratio less than 1.1 – FAIL
  3. Earnings Stability – positive earnings per share for at least 5 years – PASS
  4. Dividend Record – currently pays a dividend – PASS
  5. Earnings growth – EPSmg greater than 5 years ago – PASS

Valuation Summary

Key Data:

Recent Price $37.16
MG Value $16.95
MG Opinion Overvalued
Value Based on 3% Growth $26.72
Value Based on 0% Growth $15.66
Market Implied Growth Rate 5.83%
Net Current Asset Value (NCAV) -$2.17
PEmg 20.17
Current Ratio 1.68
PB Ratio 4.15

Balance Sheet – 3/29/2014

Current Assets $6,639,500,000
Current Liabilities $3,944,000,000
Total Debt $2,986,200,000
Total Assets $13,138,300,000
Intangible Assets $2,118,100,000
Total Liabilities $7,906,900,000
Outstanding Shares 583,940,000

Earnings Per Share

2014 (estimate) $1.87
2013 $1.67
2012 $1.90
2011 $1.96
2010 $1.99
2009 $1.77
2008 $1.81
2007 $1.60
2006 $1.35
2005 $1.47
2004 $1.37

Earnings Per Share – ModernGraham

2014 (estimate) $1.84
2013 $1.84
2012 $1.91
2011 $1.89
2010 $1.80
2009 $1.67


Dividend History
SYY Dividend Chart

SYY Dividend data by YCharts

Conclusion:

Sysco Corporation qualifies for the Enterprising Investor but not the Defensive Investor. The Defensive Investor has concerns with the low current ratio, lack of sufficient earnings growth over the last ten years, and the high PEmg and PB ratios. The Enterprising Investor’s only major concern is the high level of debt relative to the net current assets. As a result, Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company and comparing it to other opportunities. As for a valuation, the company appears to be overvalued after growing its EPSmg (normalized earnings) from $1.80 in 2010 to only an estimated $1.84 in 2014. This level of demonstrated growth supports the market’s implied estimate of 5.83% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value above the price.

Be sure to check out the previous ModernGraham valuations of Sysco Corporation (SYY) for more perspective!

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on Sysco Corporation (SYY)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Disclaimer:  The author did not hold a position in Sysco Corporation (SYY) or in any other company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  Logo taken from wikipedia for the sole purpose of identifying the company; this article is not affiliated with the company in any manner.

Sysco Corp (SYY) Quarterly Valuation – April 2014

Sysco_Logo.svgBenjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a specific look at how Sysco Corp fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Sysco Corporation (Sysco), along with its subsidiaries and divisions, is a North American distributor of food and related products primarily to the foodservice or food-away-from-home industry. The Company provides products and related services to approximately 425,000 customers, including restaurants, healthcare and educational facilities, lodging establishments and other foodservice customers. Sysco provides food and related products to the foodservice or food-away-from-home industry. The Company has aggregated its operating companies into a number of segments, of which only Broadline and SYGMA are the main segments. Broadline operating companies distribute a line of food products and a variety of non-food products to their customers. SYGMA operating companies distribute a line of food products and a variety of non-food products to chain restaurant customer locations. On October 3, 2012, the Company acquired Keelings Foods.

SYY Chart

SYY data by YCharts

Defensive Investor – must pass at least 6 of the following 7 tests: Score = 4/7

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion – PASS
  2. Sufficiently Strong Financial Condition – current ratio greater than 2 – FAIL
  3. Earnings Stability – positive earnings per share for at least 10 straight years – PASS
  4. Dividend Record – has paid a dividend for at least 10 straight years – PASS
  5. Earnings Growth – earnings per share has increased by at least 1/3 over the last 10 years using 3 year averages at beginning and end of period – FAIL
  6. Moderate PEmg ratio – PEmg is less than 20 – PASS
  7. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – FAIL

Enterprising Investor – must pass at least 4 of the following 5 tests or be suitable for a defensive investor: Score = 5/5

  1. Sufficiently Strong Financial Condition, Part 1 – current ratio greater than 1.5 – PASS
  2. Sufficiently Strong Financial Condition, Part 2 – Debt to Net Current Assets ratio less than 1.1 – PASS
  3. Earnings Stability – positive earnings per share for at least 5 years – PASS
  4. Dividend Record – currently pays a dividend – PASS
  5. Earnings growth – EPSmg greater than 5 years ago – PASS

Valuation Summary

Key Data:

Recent Price $35.74
MG Value $16.55
MG Opinion Overvalued
Value Based on 3% Growth $26.57
Value Based on 0% Growth $15.58
Market Implied Growth Rate 5.50%
Net Current Asset Value (NCAV) -$2.03
PEmg 19.50
Current Ratio 1.74
PB Ratio 3.94

Balance Sheet – 12/28/2013

Current Assets $6,520,900,000
Current Liabilities $3,749,300,000
Total Debt $2,944,100,000
Total Assets $13,013,000,000
Intangible Assets $2,107,500,000
Total Liabilities $7,709,200,000
Outstanding Shares 584,290,000

Earnings Per Share

2014 (estimate) $1.84
2013 $1.67
2012 $1.90
2011 $1.96
2010 $1.99
2009 $1.77
2008 $1.81
2007 $1.60
2006 $1.35
2005 $1.47
2004 $1.37
2003 $1.18

Earnings Per Share – ModernGraham

2014 (estimate) $1.83
2013 $1.84
2012 $1.91
2011 $1.89
2010 $1.80
2009 $1.67

Dividend History

SYY Dividend Chart

SYY Dividend data by YCharts

Conclusion:

Sysco Corp is a company that should be on the Enterprising Investor’s watch list, but it does not qualify for the Defensive Investor due to its low current ratio, lack of sufficient earnings growth over the ten year period, and the high PB ratio.  The company does pass all five requirements of the Enterprising Investor.  As a result, Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company while also reviewing 5 Low PEmg Companies for the Enterprising Investor and keeping in mind the 7 Key Tips to Value Investing.  From a valuation side of things, the company’s lack of growth in earnings results in an overvalued rating.  The company’s EPSmg (normalized earnings) have grown from $1.80 in 2010 to only an estimated $1.83 for 2014.  This very low level of growth does not support the market’s implied estimate of 5.50% earnings growth and leads the ModernGraham valuation model to return an estimate of intrinsic value that falls below the market price.

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on Sysco Corp (SYY)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

If you like our valuations, why not check out ModernGraham Stocks & Screens?  It’s a great way to review the valuations while screening for things like low PE ratio, undervalued companies, etc.!

Disclaimer:  The author did not hold a position in Sysco Corp (SYY) or any other company mentioned in the article at the time of publication and had no intention of changing that position within the next 72 hours.

Logo taken from wikipedia; this article is not affiliated with the company in any manner.

ModernGraham Valuation: Sysco Corp (SYY)

moneyCompany Profile (obtained from Google Finance): Sysco Corporation (Sysco), along with its subsidiaries and divisions, is a North American distributor of food and related products primarily to the foodservice or food-away-from-home industry. The Company provides products and related services to approximately 425,000 customers, including restaurants, healthcare and educational facilities, lodging establishments and other foodservice customers. Sysco provides food and related products to the foodservice or food-away-from-home industry. The Company has aggregated its operating companies into a number of segments, of which only Broadline and SYGMA are the main segments. Broadline operating companies distribute a line of food products and a variety of non-food products to their customers. SYGMA operating companies distribute a line of food products and a variety of non-food products to chain restaurant customer locations. On October 3, 2012, the Company acquired Keelings Foods.

Defensive and Enterprising Investor Tests (What is the significance of these tests, and what is PEmg ratio?):

Defensive Investor – must pass at least 6 of the following 7 tests: Score = 3/7

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion – PASS
  2. Sufficiently Strong Financial Condition – current ratio greater than 2 – FAIL
  3. Earnings Stability – positive earnings per share for at least 10 straight years – PASS
  4. Dividend Record – has paid a dividend for at least 10 straight years – PASS
  5. Earnings Growth – earnings per share has increased by at least 1/3 over the last 10 years using 3 year averages at beginning and end of period – FAIL
  6. Moderate PEmg ratio – PEmg is less than 20 – FAIL
  7. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – FAIL

Enterprising Investor – must pass at least 4 of the following 5 tests or be suitable for a defensive investor: Score = 5/5

  1. Sufficiently Strong Financial Condition, Part 1 – current ratio greater than 1.5 – PASS
  2. Sufficiently Strong Financial Condition, Part 2 – Debt to Net Current Assets ratio less than 1.1 – PASS
  3. Earnings Stability – positive earnings per share for at least 5 years – PASS
  4. Dividend Record – currently pays a dividend – PASS
  5. Earnings growth – EPSmg greater than 5 years ago – PASS

Valuation Summary (Explanation of the ModernGraham Valuation Model)

Key Data:

MG Value $15.38
MG Opinion Overvalued
Value Based on 3% Growth $26.14
Value Based on 0% Growth $15.32
Market Implied Growth Rate 5.83%
Net Current Asset Value (NCAV) -$2.22
PEmg 20.16
Current Ratio 1.68
PB Ratio 4.06

Balance Sheet – 9/30/2013 

Current Assets $6,534,300,000
Current Liabilities $3,883,700,000
Total Debt $2,878,400,000
Total Assets $13,025,400,000
Intangible Assets $2,108,600,000
Total Liabilities $7,826,300,000
Outstanding Shares 581,210,000

Earnings Per Share

2014 (estimate) $1.75
2013 $1.67
2012 $1.90
2011 $1.96
2010 $1.99
2009 $1.77
2008 $1.81
2007 $1.60
2006 $1.35
2005 $1.47
2004 $1.37
2003 $1.18

Earnings Per Share – ModernGraham 

2014 (estimate) $1.80
2013 $1.84
2012 $1.91
2011 $1.89
2010 $1.80
2009 $1.67

Conclusion:

Sysco Corp is a very intriguing company to the Enterprising Investor, but not the Defensive Investor.  The company’s lack of earnings growth over the ten year period along with its high PEmg and PB ratios and its low current ratio disqualify it from suitability for the Defensive Investor.  The Enterprising Investor’s requirements are all satisfied, however, so that investor type should feel comfortable proceeding with further research, beginning with a comparison to some other Enterprising Investor companies.  From a valuation standpoint, the company has not had sufficient growth in its earnings, with EPSmg (normalized earnings) only growing from $1.67 in 2009 to an estimated $1.80 for 2014.  The market is currently implying a growth rate of 5.83%, which is higher than the historical performance supports.  As a result, the company appears to be overvalued.

What do you think?  Do you agree that Sysco Corp is overvalued?  What would be your assessment?  Is the company suitable for Defensive Investors or Enterprising Investors?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

If you like our valuations, why not check out ModernGraham Stocks & Screens?  It’s a great way to review the valuations while screening for things like low PE ratio, undervalued companies, etc.!

Disclaimer:  The author did not hold a position in Sysco Corp (SYY) at the time of publication and had no intention of changing that position within the next 72 hours.

Photo Credit:  Andrew Magill

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