Trade-Ideas: Sysco Corporation (SYY) Is Today's

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

Trade-Ideas LLC identified Sysco Corporation ( SYY) as a "roof leaker" (crossing below the 200-day simple moving average on higher than normal relative volume) candidate. In addition to specific proprietary factors, Trade-Ideas identified Sysco Corporation as such a stock due to the following factors:

  • SYY has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $139.1 million.
  • SYY has traded 403,894 shares today.
  • SYY is trading at 1.84 times the normal volume for the stock at this time of day.
  • SYY crossed below its 200-day simple moving average.

'Roof Leaker' stocks are worth watching because trading stocks that begin to experience a breakdown can lead to potentially massive losses. Once psychological and technical resistance barriers like the 200-day moving average are breached on higher than normal relative volume, the stock may then be subject to emotional selling from investors that can continue to drive the stock lower. Regardless of the impetus behind the price and volume action, when a stock moves with weakness and volume it can indicate the start of a new, potentially dangerous, trend.

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More details on SYY:

Sysco Corporation, through its subsidiaries, markets and distributes a range of food and related products primarily to the foodservice or food-away-from-home industry. The stock currently has a dividend yield of 3.3%. SYY has a PE ratio of 21.1. Currently there is 1 analyst that rates Sysco Corporation a buy, 2 analysts rate it a sell, and 7 rate it a hold.

The average volume for Sysco Corporation has been 5.1 million shares per day over the past 30 days. Sysco has a market cap of $20.4 billion and is part of the services sector and wholesale industry. The stock has a beta of 0.68 and a short float of 4.6% with 6.30 days to cover. Shares are down 4.4% year-to-date as of the close of trading on Monday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Sysco Corporation as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, increase in stock price during the past year, largely solid financial position with reasonable debt levels by most measures and notable return on equity. We feel these strengths outweigh the fact that the company shows low profit margins.

Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 6.3%. Since the same quarter one year prior, revenues slightly increased by 5.7%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • SYSCO CORP' earnings per share from the most recent quarter came in slightly below the year earlier quarter. The company has suffered a declining pattern of earnings per share over the past two years. However, we anticipate this trend to reverse over the coming year. During the past fiscal year, SYSCO CORP reported lower earnings of $1.68 versus $1.91 in the prior year. This year, the market expects an improvement in earnings ($1.84 versus $1.68).
  • SYY's debt-to-equity ratio of 0.60 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Regardless of the somewhat mixed results with the debt-to-equity ratio, the company's quick ratio of 0.97 is weak.
  • The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Food & Staples Retailing industry and the overall market, SYSCO CORP's return on equity exceeds that of both the industry average and the S&P 500.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.
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