When stocks are plummeting in price, it’s hard to start buying into all the uncertainty. But a disciplined long term investor knows there’s no better time to buy than right now. And I’m not talking about buying into speculative, high-risk stocks. I’m talking about the well-proven, robust track record Tyson Foods Inc. Why? Size. Financial health. Proven performance.
Tyson Foods, Inc., together with its subsidiaries, operates as a food company worldwide. Established in 1935, and headed by CEO Noel White, the company now has 121.00k employees and with the market cap of US$22b, it falls under the large-cap group. Bear market volatility can have a short-term impact on large, well-established companies, but in the long-run, these businesses are likely to prevail. This is because fundamentally, nothing has changed. A fall in share price is hardly detrimental to its financial health and business operations. So, large-cap stocks are a safe bet to buy more of when the stock market is selling off.
Tyson Foods currently has US$9.9b debt on its books which requires regular servicing. This means it needs to have sufficient cash-on-hand to meet upcoming interest expenses. With an interest coverage ratio of 9.37x, Tyson Foods produces sufficient earnings (EBIT) to cover its interest payments. Anything above 3x is considered safe practice. Furthermore, its cash flows from operations copiously covers it debt by 30%, above the safe minimum of 20%. Not to mention, it meets the basic liquidity requirement with current assets exceeding liabilities, which further builds on its financial strength in the face of a volatile market.
TSN’s year-on-year earnings growth has been positive over the past five years, with an average annual growth rate of 27%, outpacing the industry growth rate of 8.1%. It has also returned an ROE of 24% recently, above the industry return of 15%. Tyson Foods’s strong performance over time is a demonstration of its ability to grow through cycles, raising my confidence in the company as a long-term investment.
Next Steps:Tyson Foods makes for a robust long-term investment based on its scale, financial health and track record. Remember, in bear markets, sell-offs can be unjustified. Ask yourself, has anything really changed with Tyson Foods? If not, then why not scoop it up at a discount? Lining your portfolio with a few well-established companies can reduce your risk and help you scale your wealth in the long run. One thing you should remember though, is to do your homework. Do your own research, come up with your point of view. Below is a list I’ve put together of other things you should consider before you buy:
- Future Outlook: What are well-informed industry analysts predicting for TSN’s future growth? Take a look at our free research report of analyst consensus for TSN’s outlook.
- Valuation: What is TSN worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether TSN is currently mispriced by the market.
- Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at email@example.com.