Is Tyson Foods (TSN) a Value Play?

Now trading at a price of $56.37, Tyson Foods has moved -1.45% so far today.

Tyson Foods, Inc. is an American multinational corporation based in Springdale, Arkansas, that operates in the food industry. The large-cap Consumer Staples has returned a 3.28% dividend yield over the last 12 months.

Snapshot of the Company's Consistently Thin Margins and Low Leverage:

2019-09-30 2020-09-30 2021-09-30 2022-09-30
Revenue (MM) $42,405 $43,185 $47,049 $53,282
Revenue Growth n/a 1.84% 8.95% 13.25%
Gross Margins 11.84% 12.47% 13.87% 12.51%
Gross Margins Growth n/a 5.32% 11.23% -9.81%
Operating Margins 6.53% 6.97% 9.34% 8.28%
Operating Margins Growth n/a 6.74% 34.0% -11.35%
Net Margins 4.67% 4.77% 6.48% 6.08%
Net Margins Growth n/a 2.14% 35.85% -6.17%
Earnings Per Share $5.45 $5.68 $8.39 $9.07
EPS Growth n/a 4.22% 47.71% 8.1%
Diluted Shares (MM) 363 363 363 357
Free Cash Flow (MM) $1,254 $2,675 $2,631 $800
FCF Growth n/a 113.32% -1.64% -69.59%
Capital Expenditures (MM) $1,259 $1,199 $1,209 $1,887
Net Debt / EBITDA 2.35 -0.23 -0.28 -0.08

Tyson Foods Is Currently Underpriced:

Tyson Foods has a trailing twelve month P/E ratio of 8.58 compared to the Consumer Staples sector's average of 24.36. The company doesn't issue forward earnings guidance, and the annual average growth rate of its last 5 years of reported EPS is 6.25%. On this basis, the company's PEG ratio is 1.37, which shows that it is fairly priced.

Furthermore, Tyson Foods is likely undervalued in terms of its equity because its P/B ratio is 1.175 compared to its sector average of 4.29. The company's shares are currently trading -41.16% below their Graham number, implying there is a margin of safety for the stock. The Graham number is calculated according to the formula:

√(22.5 * 5-year average EPS * book value per share) = √(22.5 * 7.39 * 55.21) = $95.81

The above analysis is intended for educational purposes only and was performed on the basis of publicly available data. It is not to be construed as a recommendation to buy or sell any security. Any buy, sell, or other recommendations mentioned in the article are direct quotations of consensus recommendations from the analysts covering the stock, and do not represent the opinions of Market Inference or its writers. Past performance, accounting data, and inferences about market position and corporate valuation are not reliable indicators of future price movements. Market Inference does not provide financial advice. Investors should conduct their own review and analysis of any company of interest before making an investment decision.