Tyson Foods, Inc. – Value Analysis (NYSE:TSN) : January 9, 2017

Capitalcube gives Tyson Foods, Inc. a score of 56.

Our analysis is based on comparing Tyson Foods, Inc. with the following peers – Pilgrim’s Pride Corporation, Sanderson Farms, Inc., Seaboard Corporation, Hormel Foods Corporation, BRF SA Sponsored ADR and Leucadia National Corporation (PPC-US, SAFM-US, SEB-US, HRL-US, BRFS-US and LUK-US).

Investment Outlook

Tyson Foods, Inc. has a fundamental score of 56 and has a relative valuation of UNDERVALUED.

Fundamental Score

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Company Overview

  • From a peer analysis perspective, relative outperformance last month is up from a median performance last year.
  • Tyson Foods, Inc. Class A’s current Price/Book of 1.89 is about median in its peer group.
  • The market expects TSN-US to grow more slowly than its peers and for its median ROE to decline.
  • TSN-US‘s relative asset efficiency and net profit margins are both around the median level.
  • Compared with its chosen peers, changes in the company’s annual earnings are better than the changes in its revenue, implying better than median cost control and/or some economies of scale.
  • TSN-US‘s return on assets has improved from below median to about median among its peers over the last five years.
  • The company’s margins are around the peer medians and do not suggest any benefit from a pricing or an operating cost advantage versus peers.
  • While TSN-US‘s revenue growth in recent years has been above the peer median, the stock’s P/E ratio is less than the peer median suggesting that the company’s earnings may be peaking and the market expects a decline in its growth expectations.
  • The company is likely overinvesting in a business with only median returns.
  • TSN-US has the financial and operating capacity to borrow quickly.

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Leverage & Liquidity

TSN-US has the financial and operating capacity to borrow quickly.

  • With debt at a relatively low 19.39% of its enterprise value compared to an overall benchmark of 25% (Note: The peer median is currently 19.12%), and a well-cushioned interest coverage level of 11.28x, TSN-US can probably borrow quickly. We classify the company as Quick & Able in terms of its capacity to raise additional debt.
  • Of the 6 chosen peers for the company, only 5 of the stocks have an outstanding debt balance. Companies with no debt include SAFM-US.

TSN-US has moved to a Quick & Able from an Some Capacity profile at the prior year-end.

  • TSN-US‘s interest coverage is over one standard deviation above its four-year average interest coverage of 8.64x.
  • While its interest coverage increased to 11.28x from 7.72x (in 2015), its peer median decreased during this period to 11.28x from 13.70x.
  • Interest coverage rose 5.98 points relative to peers.
  • TSN-US‘s debt-EV is its lowest over the last four years and compares to a high of 37.72% in 2014.
  • While its debt-EV decreased to 19.39% from 30.40% (in 2015), its peer median increased during this period to 19.12% from 2.40%.
  • Relative to peers, debt-EV fell 27.73 percentage points.

Access the detailed analysis for Tyson Foods, Inc.

Key Liquidity Items

Company Debt/Enterprise Value (%) Current Ratio Interest Coverage (x) Cash Flow To Total Debt (%)
Pilgrim’s Pride Corporation 16.08 1.62 14.36 60.63
Sanderson Farms, Inc. 0 4.14 146.47 6354.6
Seaboard Corporation 19.12 3.31 7.63 62.72
Hormel Foods Corporation 1.25 1.93 100.71 304.9
BRF SA Sponsored ADR 29.07 1.41 1.56 6.85
Leucadia National Corporation 271.67 0.87 3.01 2.42
Tyson Foods, Inc. Class A 19.39 1.77 11.28 40.8
Peer Median 19.12 1.77 11.28 60.63
Best In Class 1.25 4.14 146.47 6354.6

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Company Profile

Tyson Foods, Inc. engages in the production of processed food. It operates through the following segments: Chicken, Beef, Pork and Prepared Foods. The Chicken segment involves in domestic operations related to raising and processing live chickens into fresh, frozen, and value-added chicken products, as well as sales from allied products. The Beef segment includes operations related to processing live fed cattle and fabricating dressed beef carcasses into primal and sub-primal meat cuts and case-ready products. The Pork segment operates with live markets hogs and fabricating pork carcasses into primal and sub-primal cuts and case-ready products. The Prepared Foods segment manufactures and markets frozen and refrigerated food products and logistic operations to move products through the supply chain. The company was founded by John W. Tyson in 1935 and is headquartered in Springdale, AR.


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