About Tyson Foods

We’ve analyzed our fair share of Arkansas-based companies in the past.

Why not another?

We’ve also got a brand new dance move called the “Tyson Tumble.”

It’s a bit tricky but once you get the hang of it you’ll be golden.

You start off by looking up “Tyson Foods’ stock” on Google, take a gander at the company’s five year stock chart and do a little two step whilst looking at the company’s recent share price decline.

It’s pretty catchy, right?

While many tend to be irrationally fearful (although sometimes it’s rational), we tend to be the most optimistic and opportunity-hungry when things seem to be taking a turn for the worst. 

As arguably one of the greatest investors ever Warren Buffett said, “Be greedy when others are fearful.”

Now that the economy has officially transitioned into recession territory, we think it’s vital that investors of all backgrounds look to pick up shares in quality companies with depressed stock prices.

Our initial guess is that Tyson Foods falls into this category as it’s the world’s largest poultry (primarily chicken) producer in the world. From nuggets to chicken breasts, Tyson has you covered.

Although they serve customers pretty well at the grocery store, we also think it’s worth noting that the company also does a fair amount of business with prominent restaurant and dining chains such as McDonald’s.

The company is also subsidiary-heavy as it’s home to Tyson (of course), Jimmy Dean, Hillshire Farm, Ball Park, State Fair and plenty of others.

We like the company so far.

Let’s see just how quality this company and its stock are and whether or not you should be a chicken when it comes to investing in Tyson’s stock.

Tyson’s stock financials

To kick things off, Tyson currently maintains a market capitalization of $23.86 billion, a price-to-earnings (P/E) ratio of 6.06 and pays its shareholders an annual dividend of $1.84, yielding nearly 3%.

Given the recent pummel in share price, it makes sense that Tyson’s stock has apparently become cheaper both on a basic share price basis as well as on a price-to-earnings basis. Specifically, the company’s share price appears significantly undervalued given its P/E ratio standing at way less than 20 which likely followed and was a direct result of its almost 12% drop in share price over the past month.

However, as many might be able to imagine, we don’t think Tyson’s recent drop in share price is a “Tyson” problem, but more the result of a broader stock market decline, which has negatively impacted many (if not all) big cap, blue chip stocks across the board.

Hence the potential opportunity to invest in a quality company at a quality share price.

As it relates to Tyson’s balance sheet, the company’s executive team oversees approximately $36.3 billion in total assets along with nearly $18.6 billion in total liabilities.

For this large-scale company and with as many operations and its general sensitivities to commodity price fluctuations (i.e., the price of chicken), we view this as a fantastic balance sheet with total assets almost doubling the amount of Tyson’s total liabilities.

Although we’ve alluded to the fact that the company is giant and mature in its relevant industry, Tyson has still surprisingly found ways to generate growth in its revenue, according to its income statement. For instance, in 2017 the company’s total revenue stood at around $38.2 billion and has since risen each subsequent year to its most recent report of just north of $47 billion in 2021.

Although some might not see it as all too surprising or impressive since no matter how bad the state of the economy is people still like or need to eat chicken (non-vegetarians, that is) and feed their families, their recent revenue growth speaks to Tyson’s relatively recession proof business model. 

Like many other consumer staples that you find at your local grocery store, Tyson has a considerable amount of pricing power even amidst the company reportedly planning on raising chicken prices by upwards of 20%.

While indisputably bad for the consumer, from a business and revenue standpoint alone, Tyson seems to be doing its job for its shareholders, whether we like it or not.

Nevertheless, we think discerning between moral investing and investing myopically for the sake of profit are also important things to wrestle with as an individual, which is why we’ve written extensively about this topic in the past.

Back to the chicken company.

Tyson has done a great job raking in the net income and ultimately the cash, according to its cash flow statement. Particularly, both have been steady over the last five years, ranging between $1.7 billion and nearly $4 billion.

Tyson’s stock fundamentals

On the profitability front, the company’s trailing twelve month (TTM) net profit margin is slightly above that of the industry’s average, which is ultracompetitive, butting heads against the likes of fellow industry domineers such as Hormel and equally as threatening competitors such as Cargill, Sanderson Farms, Pilgrim’s Pride as well as smaller but regionally powerful domestic manufacturers and suppliers.

We’re just glad Tyson’s TTM net profit margin was in line with the industry, let alone above the competition, even if not by a wide margin (less than 1%), as Tyson’s presently stands at 7.77% to the industry’s average of 6.96%.

While scoring a higher profit than the aforementioned competition is by no means an easy accomplishment, our team was delighted to find that the company’s TTM returns on assets and investment were comparably higher than the competition. As a reference, Tyson’s returns on assets exceed the industry’s by nearly 6% and the same for returns on investment by nearly 5%.

Should you buy Tyson stock?

As with any investment, there are many factors to consider before diving head first into even the largest, best capitalized companies. Aside from some facts and figures, the company has plenty of costs that it can’t control and some might be opposed to investing in the company given accusations and allegations made against the company.

Nevertheless, from an objective investment standpoint, we find it appropriate to give the company’s stock a “buy” rating.

DISCLAIMER: This analysis of the aforementioned stock security is in no way to be construed, understood, or seen as formal, professional, or any other form of investment advice. We are simply expressing our opinions regarding a publicly traded entity.