Sysco Corporation (NYSE:SYY) shares are up more than 21.19% this year and recently decreased -1.19% or -$0.89 to settle at $73.60. Barclays PLC (NYSE:BCS), on the other hand, is down -16.15% year to date as of 09/13/2018. It currently trades at $9.14 and has returned -1.83% during the past week.
Sysco Corporation (NYSE:SYY) and Barclays PLC (NYSE:BCS) are the two most active stocks in the Food Wholesale industry based on today’s trading volumes. The market is clearly enthusiastic about both these stocks, but which is the better investment? To answer this, we will compare the two companies based on the strength of their growth, profitability, risk, returns, valuation, analyst recommendations, and insider trends.Growth
Companies that can increase earnings at a high compound rate over time are attractive to investors. Analysts expect SYY to grow earnings at a 12.58% annual rate over the next 5 years. Comparatively, BCS is expected to grow at a 25.70% annual rate. All else equal, BCS’s higher growth rate would imply a greater potential for capital appreciation.Profitability and Returns
Growth doesn’t mean much if it comes at the cost of weak profitability. To adjust for differences in capital structure we’ll use EBITDA margin and Return on Investment (ROI) as measures of profitability and return. , compared to an EBITDA margin of 5.61% for Barclays PLC (BCS). SYY’s ROI is 16.90% while BCS has a ROI of 1.90%. The interpretation is that SYY’s business generates a higher return on investment than BCS’s.Cash Flow
The amount of free cash flow available to investors is ultimately what determines the value of a stock. SYY’s free cash flow (“FCF”) per share for the trailing twelve months was +1.01. Comparatively, BCS’s free cash flow per share was -. On a percent-of-sales basis, SYY’s free cash flow was 0.89% while BCS converted 0% of its revenues into cash flow. This means that, for a given level of sales, SYY is able to generate more free cash flow for investors.Liquidity and Financial Risk
SYY’s debt-to-equity ratio is 3.09 versus a D/E of 1.61 for BCS. SYY is therefore the more solvent of the two companies, and has lower financial risk.
SYY trades at a forward P/E of 19.02, a P/B of 15.30, and a P/S of 0.65, compared to a forward P/E of 7.81, a P/B of 0.49, and a P/S of 3.31 for BCS. SYY is the cheaper of the two stocks on sales basis but is expensive in terms of P/E and P/B ratio. Given that earnings are what matter most to investors, analysts tend to place a greater weight on the P/E.
Analyst Price Targets and Opinions
Investors often compare a stock’s current price to an analyst price target to get a sense of the potential upside within the next year. SYY is currently priced at a 0.25% to its one-year price target of 73.42. Comparatively, BCS is -19.75% relative to its price target of 11.39. This suggests that BCS is the better investment over the next year.
Risk and Volatility
Beta is an important measure that gives investors a sense of the market risk associated with a particular stock. A beta above 1 signals above average market risk, while a beta below 1 implies below average volatility. SYY has a beta of 0.56 and BCS’s beta is 0.72. SYY’s shares are therefore the less volatile of the two stocks.Insider Activity and Investor Sentiment
Comparing the number of shares sold short to the float is a method analysts often use to get a reading on investor sentiment. SYY has a short ratio of 5.83 compared to a short interest of 6.67 for BCS. This implies that the market is currently less bearish on the outlook for SYY.Summary
Sysco Corporation (NYSE:SYY) beats Barclays PLC (NYSE:BCS) on a total of 8 of the 14 factors compared between the two stocks. SYY generates a higher return on investment, has higher cash flow per share, has a higher cash conversion rate and higher liquidity. Finally, SYY has better sentiment signals based on short interest.