Is Tyson Foods (TSN) A Great Stock For Value Investors?

Value investing is easily one of the most popular ways to find great stocks in any market environment. After all, who wouldn’t want to find stocks that are either flying under the radar and are compelling buys, or offer up tantalizing discounts when compared to fair value?

One way to find these companies is by looking at several key metrics and financial ratios, many of which are crucial in the value stock selection process. Let’s put Tyson Foods, Inc. (NYSE:TSN) stock into this equation and find out if it is a good choice for value-oriented investors right now, or if investors subscribing to this methodology should look elsewhere for top picks:

PE Ratio

A key metric that value investors always look at is the Price to Earnings Ratio, or PE for short. This shows us how much investors are willing to pay for each dollar of earnings in a given stock, and is easily one of the most popular financial ratios in the world. The best use of the PE ratio is to compare the stock’s current PE ratio with: a) where this ratio has been in the past; b) how it compares to the average for the industry/sector; and c) how it compares to the market as a whole.

On this front, Tyson Foods has a trailing twelve months PE ratio of 12.14, as you can see in the chart below:

This level actually compares pretty favorably with the market at large, as the PE for the S&P 500 stands at about 20.40. If we focus on the long-term PE trend, Tyson Foods’ current PE level puts it slightly below its midpoint of 13.57 over the past five years. Moreover, the current level stands much below the highs for the stock, highlighting that it could be a great entry point.



Further, the stock’s PE compares favorably with the Zacks classified Consumer Staples sector’s trailing twelve months PE ratio, which stands at 25.66. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.



We should also point out that Tyson Foods has a forward PE ratio (price relative to this year’s earnings) of just 11.56, so it is fair to say that a slightly more value-oriented path may be ahead for Tyson Foods stock in the near term too.

P/S Ratio

Another key metric to note is the Price/Sales ratio. This approach compares a given stock’s price to its total sales, where a lower reading is generally considered better. Some people like this metric more than other value-focused ones because it looks at sales, something that is far harder to manipulate with accounting tricks than earnings.

Right now, Tyson Foods has a P/S ratio of about 0.58. This is way lower than the S&P 500 average, which comes in at 3.15 right now – indicating that the stock is undervalued from this aspect too.



Broad Value Outlook

In aggregate, Tyson Foods currently has a Zacks Value Style Score of ‘A’, putting it into the top 20% of all stocks we cover from this look. This makes Tyson Foods a solid choice for value investors, and some of its other key metrics make this pretty clear too.

For example, the P/CF ratio (another great indicator of value) for Tyson Foods is 11.30, a level that is lower than the industry average of 16.52. Clearly, TSN is a solid choice on the value front from multiple angles.

What About the Stock Overall?

Though Tyson Foods might be a good choice for value investors, there are plenty of other factors to consider before investing in this name. In particular, it is worth noting that the company has a Growth grade of ‘F’ and a Momentum score of ‘B’. This gives TSN a Zacks VGM score—or its overarching fundamental grade—of ‘B’. (You can read more about the Zacks Style Scores here >>)

Meanwhile, the company’s recent earnings estimates have been discouraging. The current quarter has seen two estimates go lower in the past thirty days compared to no upward revisions, while the full year estimate has seen three downward and no upward revisions in the same time period.

This has had a negative impact on the consensus estimate, as the current quarter consensus estimate has declined 3.2% in the past one month, while the full year estimate has inched lower by 0.8%. You can see the consensus estimate trend and recent price action for the stock in the chart below:

In light of these bearish trends, the stock has just a Zacks Rank #3 (Hold) indicating why we are looking for in-line performance from the company in the near term.

Bottom Line

Tyson Foods is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. However, with a sluggish industry rank (Bottom 22% out of over 250 industries) and a Zacks Rank #3, it is hard to get too excited about this company overall. Further, the Zacks categorized Food – Meat Products industry has underperformed the broader market over the last one year, as evident from the chart below.

So, value investors might want to wait for estimates and analyst sentiment to turn around in this name first, but once that happens, this stock could be a compelling pick.

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Tyson Foods, Inc. (TSN): Free Stock Analysis Report

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