At US$58.18, Is It Time To Put Tyson Foods, Inc. (NYSE:TSN) On Your Watch List?

Let's talk about the popular Tyson Foods, Inc. (NYSE:TSN). The company's shares saw significant share price movement during recent months on the NYSE, rising to highs of US$64.54 and falling to the lows of US$57.14. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Tyson Foods' current trading price of US$58.18 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Tyson Foods’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

Check out our latest analysis for Tyson Foods

What's The Opportunity In Tyson Foods?

Tyson Foods appears to be expensive according to our price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average. We’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 25.88x is currently well-above the industry average of 20.83x, meaning that it is trading at a more expensive price relative to its peers. In addition to this, it seems like Tyson Foods’s share price is quite stable, which could mean two things: firstly, it may take the share price a while to fall back down to an attractive buying range, and secondly, there may be less chances to buy low in the future once it reaches that value. This is because the stock is less volatile than the wider market given its low beta.

Can we expect growth from Tyson Foods?

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. With profit expected to more than double over the next couple of years, the future seems bright for Tyson Foods. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.

What This Means For You

Are you a shareholder? It seems like the market has well and truly priced in TSN’s positive outlook, with shares trading above industry price multiples. However, this brings up another question – is now the right time to sell? If you believe TSN should trade below its current price, selling high and buying it back up again when its price falls towards the industry PE ratio can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping tabs on TSN for some time, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the optimistic prospect is encouraging for TSN, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

So while earnings quality is important, it's equally important to consider the risks facing Tyson Foods at this point in time. In terms of investment risks, we've identified 3 warning signs with Tyson Foods, and understanding these should be part of your investment process.

If you are no longer interested in Tyson Foods, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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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.