Tyson Foods giant has its stock sitting well below the average price to earnings ratio that the rest of the general market is trading at. This may be a solid opportunity to take a bite into a great company and watch the stock move higher.
Tyson Foods (TSN) is the processor of chicken, beef, pork as well as other food products. Most of us in one way or another have purchased their products as they are in nearly every supermarket in America.
One of the things that caught my eye was the company’s ability to return nearly 19% on equity. And, their margins on that equity was approximately 5%. I looked heavily at these variables and asked where that would put the company with their earnings and stock price going forward.
First, here are the earnings over the past several years:
The company has been diligent, and successful, at bringing in continually increasing earnings over the past several years. However, the final quarter of 2016 there was a drop in earnings, but overall the outlook going forward is continued increases on a year-over-year basis.
The 2016 earnings are looking to increase to roughly $5.50 per share. But, the company’s stock is trading at just below $60.00 per share. That puts the company at the threshold at about the price-to-earnings level that I am always looking at to trigger me taking a microscope to their financial numbers.
But, as I mentioned, I looked at the return-on-equity that caught my eye. 18% is a pretty good number, albeit, Tyson does not even come close to having a monopoly on return variables. Still, given their return and the average return for their margins at 5% several sources are projecting revenues at levels that would put 2017’s numbers well above 10-times earnings and increases that are above the 5% that I usually look for.
These variables put Tyson on my watch list and they should do the same for you. There are economic fundamentals that make this a good investment. First, the advances in the U.S. economy make it so that families will likely start to earn a lot more over the coming years. Statistics show that usually, one of the first things you do when your earnings improve is you purchase higher priced food items. Tyson does a lot of processed foods but they also do a lot of raw meats such as beef and pork. Chicken is considered the food item that the lowest income levels consume the most simply because it is a meat item and it is the cheapest. Beef is the most expensive. Families will begin switching away from chicken products into beef products. And, that is where Tyson will be able to take advantage of its return on capital and revenue returns.
Tyson has a number of labels that it operates that will be able to profit nicely with the shift that is underway in America’s homes. These labels are staples and well known throughout the country. Increased advertising should be able to help the company to capture these moves and profit from them.
Tyson is a great company based on what it owns and produces. And, given its strategic advantage in the food world as well as distribution network, it is well positioned to be very profitable in the future. Putting this company into your watch list would be a wise move. They are trading at nearly 12-times earnings and are likely to see a sizable increase in its revenue, and earnings. The market is offering this stock at a reduced price now and will likely offer the stock at an even better price once the inauguration is over with and the business of business gets on. You would want to hold on to this stock for a very long term holding.
|This article from Macroaxis published on 11 of January contributed to the next trading period price escalation.The trading price change to the next next day price was 0.37% . The trading price change when the story was published to current price is 1.50% .|