Opinions
Jon Vialoux
Sysco Corp
SYY-N
PAST TOP PICK
Jan 08, 2016
$39.800
Stock price when the opinion was issued
wholesale distributors
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A fine way to play the restaurant comeback. This food distributors supplies restos, schools and hotels in the US and Ireland. Yesterday's investor day they unveiled plans to grow 50% faster than their industry and a $5 billion share buyback, raising the dividend by 4.4% and announced the key purchase of an Italian food distributor.
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BUY
The market prefers Growth at a Reasonable Price (GARP) stock as rates rise and tech is unfashionable. The PEG ratio is a key metric. These shares pay big dividends or buyback shares. In January, 10% of their workers tested positive for Covid, but that's the past and we're returning to normal. SYY has taken a lot of market share during Covid. Earnings will double this year, and it trades under 20x PE. Great managers.
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BUY
PEG ratio = price/EPS divided by EPS growth rate. Too high and too low a PEG ratio is not good. A top food supplier to restaurants. Has held up well vs. the index, but has been rangebound in the past year. It's trading under 17x 2023 PE and a PEG ratio of 1.2. Cheap. They can pass food inflation to their customers. Also, diners still want to dine out even as the economy slows. Pays a nearly 2.5% dividend yield. SYS has little competition too.
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TOP PICK
Stockchase Research Editor: Michael O'Reilly
SYY distributes food through the US, Canada and Europe. It has invested in new supply chain inventory management systems for its customers allowing margins to expand and strong profit growth. It trades at 20x earnings and we like that cash reserves continue growing, while debt is reduced and shares bought back. The dividend is backed by a payout ratio under 50% of cash flow. We recommend setting a stop-loss at $71, looking to achieve $92 -- upside potential of 18%. Yield 2.4%
(Analysts’ price target is $87.91)
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(A Top Pick Oct 9/15. Down 2.01%.) At the time he wanted to be a bit more defensive. October to May is really a cyclical time where you want to take on a lot of risk in your portfolio, but he was just not liking the market action, so was being fairly defensive at the time. On this stock, the average gain between Oct 10 to Dec 31 is about 9%, but this hit resistance at about $41.50. During the period of seasonal strength, it ended up with a marginal gain of about 0.12%.