It's been a great morning session for Sysco investors, who saw their shares rise 1.4% to a price of $76.73 per share. At these higher prices, is the company still fairly valued? If you are thinking about investing, make sure to check the company's fundamentals before making a decision.
Sysco's Valuation Is in Line With Its Sector Averages:
Sysco Corporation, through its subsidiaries, engages in the marketing and distribution of various food and related products to the foodservice or food-away-from-home industry in the United States, Canada, the United Kingdom, France, and internationally. The company belongs to the Consumer Discretionary sector, which has an average price to earnings (P/E) ratio of 22.96 and an average price to book (P/B) ratio of 4.24. In contrast, Sysco has a trailing 12 month P/E ratio of 18.8 and a P/B ratio of 16.08.
Sysco's PEG ratio is 1.44, which shows that the stock is probably overvalued in terms of its estimated growth. For reference, a PEG ratio near or below 1 is a potential signal that a company is undervalued.
Wider Gross Margins Than the Industry Average of 14.39%:
| 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | |
|---|---|---|---|---|---|---|
| Revenue (M) | $58,727 | $60,114 | $52,893 | $51,298 | $68,636 | $76,325 |
| Gross Margins | 19% | 19% | 19% | 18% | 18% | 18% |
| Net Margins | 2% | 3% | 0% | 1% | 2% | 2% |
| Net Income (M) | $1,431 | $1,674 | $215 | $524 | $1,359 | $1,770 |
| Net Interest Expense (M) | -$395 | -$360 | -$408 | -$880 | -$624 | -$527 |
| Depreciation & Amort. (M) | $28 | $21 | $23 | $26 | $22 | $20 |
| Diluted Shares (M) | 525 | 516 | 513 | 516 | 510 | 506 |
| Earnings Per Share | $2.7 | $3.2 | $0.42 | $1.02 | $2.64 | $3.47 |
| EPS Growth | n/a | 18.52% | -86.88% | 142.86% | 158.82% | 31.44% |
| Avg. Price | $58.02 | $65.42 | $57.42 | $73.9 | $79.64 | $76.73 |
| P/E Ratio | 21.18 | 20.19 | 136.71 | 71.75 | 29.94 | 21.99 |
| Free Cash Flow (M) | $1,468 | $1,719 | $898 | $1,433 | $1,158 | $2,074 |
| CAPEX (M) | $688 | $692 | $720 | $471 | $633 | $793 |
| EV / EBITDA | 16.31 | 17.51 | 49.05 | 31.8 | 21.42 | 16.31 |
| Total Debt (M) | $8,802 | $8,130 | $14,445 | $11,074 | $10,931 | $12,091 |
| Net Debt / EBITDA | 3.44 | 3.23 | 11.24 | 6.11 | 4.4 | 3.64 |
| Current Ratio | 1.25 | 1.25 | 1.79 | 1.38 | 1.24 | 1.37 |
Sysco has generally positive cash flows and growing revenues and a flat capital expenditure trend. Additionally, the company's financial statements display wider gross margins than its peer group and positive EPS growth. However, the firm has a highly leveraged balance sheet. Finally, we note that Sysco has just enough current assets to cover current liabilities, as shown by its current ratio of 1.37.
