Assessing Sysco Shares After Recent 4.8% Dip and Supply Chain Push

If you have been keeping an eye on Sysco's stock lately, you are probably weighing your options: is this the moment to buy, hold, or cash in? Over the last month, Sysco's shares have slipped by 4.8%, following a 2.4% dip in just the past week. Yet, that short-term slide shrinks in the rearview mirror when you zoom out. The stock is still up 3.0% year-to-date, with gains of 6.7% over the past year and a striking 55.4% rise over five years. In other words, despite some recent bumps, the long-term growth story looks compelling.

Part of the recent price movement has to do with broader industry trends. Sysco has been investing heavily in supply chain modernization and has initiated new partnerships aimed at expanding its reach in both food service and grocery delivery. This renewed focus on efficiency and customer reach has kept investors interested, even as the market grows more cautious about consumer spending.

So, what is the takeaway when it comes to Sysco's valuation? Using six common metrics to assess undervaluation, Sysco scores a robust 5 out of 6, signaling it is undervalued by most measures. However, not all metrics are created equal. Next, we will break down how these different valuation checks stack up for Sysco and explore why the most useful valuation approach might still be yet to come.

Why Sysco is lagging behind its peers

Approach 1: Sysco Discounted Cash Flow (DCF) Analysis

The Discounted Cash Flow (DCF) model estimates the true worth of a company by projecting its future cash flows and discounting them back to their present value. This approach focuses on assessing whether the current share price reflects the business's expected future earning power.

For Sysco, the DCF model starts with its current Free Cash Flow, which stands at $1.64 Billion. Analyst estimates project steady growth in these cash flows, reaching approximately $3.27 Billion by 2029. Projections for the first five years are based on analyst data, while forecasts from 2030 onward are calculated using extrapolations to reflect longer-term trends.

According to this analysis, Sysco's fair value per share is estimated at $145.90. This suggests the stock is trading at an implied 46.5% discount compared to this intrinsic value. The difference indicates that, based strictly on future cash flow potential, the market may be undervaluing Sysco’s long-term prospects.

Result: UNDERVALUED

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Sysco.

Our Discounted Cash Flow (DCF) analysis suggests Sysco is undervalued by 46.5%. Track this in your watchlist or portfolio, or discover more undervalued stocks.

Approach 2: Sysco Price vs Earnings

For profitable companies like Sysco, the Price-to-Earnings (PE) ratio is often the preferred tool for comparing how much investors are willing to pay today for a dollar of current earnings. It is especially useful because it reflects what the market expects for company growth and how much risk investors perceive.

Typically, higher PE ratios are justified when the company has strong growth prospects or lower risk. Lower ratios can signal slower growth or more uncertainty ahead. For Sysco, the current PE ratio stands at 20.4x. This is quite similar to the Consumer Retailing industry average of 21.0x, but noticeably below the peer average of 32.5x, which suggests that Sysco may be priced more modestly than many of its competitors.

Simply Wall St's proprietary “Fair Ratio” model gives added nuance to this valuation. The Fair Ratio for Sysco is calculated at 22.4x, taking into account not just industry and peer benchmarks, but also Sysco's earnings growth, profit margins, market capitalization and risk profile. This approach makes it more tailored and arguably more accurate than just comparing to broad averages, as it factors in what actually matters for Sysco right now.

With Sysco’s actual PE ratio (20.4x) sitting slightly below its Fair Ratio (22.4x), the stock appears to be undervalued when you account for all these specific influences.

Result: UNDERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Sysco Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives. A Narrative is simply your own story or perspective on a company, making the numbers uniquely yours. Narratives allow you to connect Sysco’s business story—your beliefs about its opportunities, risks, and industry shifts—to a personal forecast of revenue, earnings, and margins, and then to a fair value for the stock.

This tool is accessible and easy to use, available for millions of investors on Simply Wall St’s Community page. Narratives help you decide when to buy, hold, or sell by showing how your fair value (based on your story and forecasts) compares to the current market price, all in a clear, up-to-date format.

When new news or earnings are released, Narratives update automatically, ensuring your storyline is always relevant. For Sysco, for example, one investor might focus on its strong expansion and project a fair value near $93.00 per share, while another who is more cautious about labor tensions and economic headwinds may set a lower fair value closer to $77.00. Narratives empower you to invest with confidence, grounded in your own understanding and expectations, rather than relying solely on analyst consensus or backward-looking metrics.

Do you think there's more to the story for Sysco? Create your own Narrative to let the Community know!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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