Trade-Ideas: Sysco (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.

Trade-Ideas LLC identified Sysco ( SYY) as a "barbarian at the gate" (strong stocks crossing above resistance with today's range greater than 200%) candidate. In addition to specific proprietary factors, Trade-Ideas identified Sysco 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 $138.0 million.
  • SYY has traded 1.4 million shares today.
  • SYY traded in a range 275.8% of the normal price range with a price range of $0.91.
  • SYY traded above its daily resistance level (quality: 33 days, meaning that the stock is crossing a resistance level set by the last 33 calendar days. The resistance price is defined by the Price - $0.01 at the time of the signal).

Stocks matching the 'Barbarian at the Gate' criteria are worthwhile stocks to watch for a variety of factors including historical back testing and volatility. Trade-Ideas targets these opportunities because the stock is exhibiting an unusual behavior while displaying positive price action. In this case, the stock crossed an important inflection point; namely, 'resistance' while at the same time the range of the stock's movement in price is more than twice its normal size. This large range foreshadows a possible continuation as the stock moves higher.

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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. It operates in Broadline and SYGMA segments. The stock currently has a dividend yield of 3.2%. SYY has a PE ratio of 26. Currently there are 2 analysts that rate Sysco a buy, 1 analyst rates it a sell, and 6 rate it a hold.

The average volume for Sysco has been 3.4 million shares per day over the past 30 days. Sysco has a market cap of $22.3 billion and is part of the services sector and wholesale industry. The stock has a beta of 0.81 and a short float of 4.2% with 6.80 days to cover. Shares are down 5.3% year-to-date as of the close of trading on Tuesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Sysco as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, good cash flow from operations and reasonable valuation levels. We feel its strengths outweigh the fact that the company shows low profit margins.

Highlights from the ratings report include:
  • SYY's revenue growth has slightly outpaced the industry average of 5.0%. Since the same quarter one year prior, revenues slightly increased by 4.2%. 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.
  • Net operating cash flow has slightly increased to $408.06 million or 4.65% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -24.50%.
  • 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 $1.58 versus $1.68 in the prior year. This year, the market expects an improvement in earnings ($1.83 versus $1.58).
  • In its most recent trading session, SYY has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. Looking ahead, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that the other strengths this company displays justify these higher price levels.

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