Sysco (SYY) is a Value Investment?
Sysco (SYY) is a value investment that most people have never heard of. Yet strangely, almost every American sees Sysco’s trucks almost every day.
To explain, Sysco (NYSE: SYY) is the company that seems to deliver food to almost every eatery in America. In fact, Sysco operates 330 distribution facilities that serve 600,000 food service businesses.
Hence, Sysco has one of America’s largest food distribution networks. In comparison, America’s largest standalone Kroger (NYSE: KR) grocer operates 37 manufacturing facilities that serve 2,782 supermarkets.
SYSCO (SYY) Operates one of America’s largest food distribution networks
Thus Sysco (SYY) is a value investment because it operates one of America’s largest food distribution networks.
The growth potential for such a network is vast because of America’s changing dining and shopping habits. In particular, like GrubHub (NYSE: GRUB) which delivers restaurant meals to homes are growing like weeds. For instance, GrubHub’s revenues grew at a rate of 51.62% during 2nd Quarter 2018.
Importantly, food delivery is now a $17 billion business, The Nashville Tennessean reports. Meal delivery so profitable, Amazon (NASDAQ: AMZN) is entering the sector with Amazon Restaurants.
Sysco will make more money from Meal Delivery
Meal delivery services increase the demand for restaurant meals which increases the amount of food restaurants order. Hence Sysco makes more money because Sysco delivers the food to restaurants.
Sysco is likely to make more money for years to come because meal delivery could grow from $17 billion in 2018 to $24 billion in 2023, Statista calculates. Thus, Sysco is likely to see sustained revenue growth for years to come.
Logically, a long-term opportunity for Sysco is to cut out the middleman and sell meals or meal kits directly to delivery services like Instacart, GrubHub, DoorDash, Amazon, and UberEats. Hence, Sysco could eliminate the middleman and make money from delivery.
Is Sysco (SYY) Making Money?
Okay, the future for Sysco Corp (NYSE: SYY) is bright but is it making money? The financial numbers say yes Sysco is making money.
For example, Sysco earned a gross profit of $2.904 billion on revenues of $15.215 billion in 3rd Quarter 2018. Tellingly those revenues grew at a rate of 3.86% during the 3rd Quarter.
Specifically, Sysco records an operating income of $628.14 and a net income for 3rd Quarter 2018. Plus, Sysco generated an operating cash flow of $271.15 million, a financing cash flow of $68.39 million and a free cash flow of $170.66 million for 3rd Quarter.
Therefore, Sysco makes money but it has a hard time keeping its cash. Tellingly Sysco had just $790.30 million in cash and equivalents on 29 September 2018.
Under these circumstances, selling directly to food delivery services or entering the meal kit business could be wise moves for Sysco. In particular, Sysco needs to develop new streams of cash.
Is Sysco (SYY) a good dividend stock?
Sysco (SYY) is a value investment because Mr. Market affordably priced it at $62.89 on 23 January 2019. But is Sysco a good dividend stock?
Currently, the answer is yes because Sysco will pay a 39¢ dividend on 25 January 2019. Moreover, that dividend is 3¢ more than the dividend paid on 26 October 2019.
Impressively, Sysco’s dividend has grown by 8¢ in the past three years. To explain, Sysco paid a 31¢ dividend in 2016 that grew to 33¢ in 2017, 36¢ in 2018, and 39¢ in 2019.
In fact, Sysco’s dividends have been growing for the past 48 years, Dividend.com claims. Moreover, Sysco offered investors a dividend yield of 2.48%, an annualized payout of $1.56, and a payout ratio of 44.7% on 23 January 2019.
Consequently, Sysco is a value investment because of its low price, and a strong dividend. More importantly, Sysco is a value investment and a good dividend stock positioned for a lot of growth.
Changing Behaviors Make Sysco a Growth stock
Sysco (SYY) is a value investment that poised for growth because of changing American behavior.
In particular, many Americans are too lazy, or too busy to cook. Yet they still want a hot meal that does not come from a microwave. Fortunately for Sysco, GrubHub, UberEats, DoorDash, Amazon Restaurants, etc. are waiting to provide that meal on every smartphone.
Thus it is now easier and cheaper than ever to order takeout. Moreover, the variety of takeout available these days is incredible. For instance, one meal delivery service; Amazon Restaurants, offers meals from 100 eateries in one city, Nashville, The Tennessean reports.
However, ingredients in 80% to 90% of those meals probably come from Sysco. Besides ingredients, there is a strong possibility that Sysco provides the takeout boxes.
Sysco (SYY) is a value investment because it will win the takeout wars
Beyond ingredients, Sysco sells almost everything restaurants use including cleaning supplies, cooking utensils, and napkins. Thus, Sysco will make more money every time takeout and delivery expand.
Moreover, Sysco is cheaper than GrubHub; which was trading at $74.46 a share on 12 January 2018. Appealingly, Sysco pays a dividend while GrubHub offers no dividend. Thus GrubHub is a potential value investment while Sysco is a value investment right now.
Therefore, if you are looking for a value
Best of all, Sysco investors can make money no matter who wins the takeout app wars. Sysco will win because it will provide the ingredients and supplies no matter who delivers the meal.
Value and dividend investors could profit from the takeout app explosion through Sysco. The long ignored and under-appreciated Sysco (NYSE: SYY) is the best value investment for the meal delivery explosion.
