In most markets, food stocks are similar to consumer staples as they have reliable revenues and low margins, making their earnings results quite predictable. However, this is not the case in inflationary environments.
In these environments, food stocks can massively outperform as they are well-equipped to pass on rising costs to their customers. A quick look at the food sector reveals there are plenty of solid candidates to choose from.
Tyson Foods (TSN) and Sanderson Farms (SAFM) are two of the more intriguing food stocks at the current moment. Most people have not only heard of these companies but also regularly purchase their food products.
TSN has been in business since 1935. Based in Arkansas, TSN is a chicken, pork, beef, and prepared foods producer and distributor. The majority of TSN products are sold in grocery stores and used by chain restaurants. The company also makes money from selling meat to clients including military commissaries, domestic distributors, international export companies, and more. Nearly one-third of all TSN revenue stems from the sale of chicken.
TSN is currently trading around $79 per share. The stock’s 52-week high is $81.79. TSN’s 52-week low is $55.82. The stock has a forward P/E ratio of 12.44, indicating it might be priced a bit lower than where it should be trading. TSN has a beta of 0.82. This low beta is a sign the stock is unlikely to make a meaningful move should the market get rocky.
TSN has a B POWR Rating grade so it qualifies as a Buy. The stock has an A Value component grade along with Bs in the Sentiment and Growth components of the POWR Ratings. You can learn more about the stock’s grades in the rest of the POWR Ratings such as Quality, Momentum, and Stability by clicking here.
Out of the 82 stocks in the Food Makers segment, TSN is ranked 22nd. Investors who want to find out more about the stocks in the Food Makers segment can do so by clicking here.
The analysts insist TSN is underpriced. The average analyst price target for the stock is $83.18. If TSN moves to this price, it will have popped by more than 18%. In the prior 89 days, the average analyst price target for TSN has increased by $3.40.
SAFM processes poultry, creating both fresh and frozen chicken. SAFM also generates revenue with the sale of ice packs and chill packs. SAFM has a comprehensive prepared chicken plant, a dozen processing plants, 11 hatcheries, and nine feed mills.
SAFM has a beta of 0.67 so it probably won’t move much should the stock market as a whole suffer a massive slide or make a major leap. SAFM has a forward P/E ratio of 12.73. This is a fairly low P/E ratio that indicates the stock might be underpriced. SAFM is currently trading within a dollar of its 52-week high of $196.38. The stock has a 52-week low of $112.73.
SAFM has an A POWR Rating grade. The stock has an A Growth component grade along with Bs in the Quality and Value components of the POWR Ratings. Investors who would like to learn more about the stock’s POWR Rating component grades in the Momentum, Sentiment, and Stability components can do so by clicking here.
SAFM is ranked in the top five of the Food Makers segment, slotting in at number four overall out of 82 stocks in the space. You can learn more about Food Makers stocks by clicking here.
The analysts’ average price target for SAFM has increased nearly $38 across the previous half-year. The stock soared 12% in late June after reports circulated that the company was discussing a potential sale. It was rumored that SAFM allied with Centerview Partners to explore the prospect of a takeover. If SAFM were acquired, the stock would undoubtedly increase, possibly blasting through its 52-week high of $196.38.
TSN shares were trading at $79.63 per share on Wednesday afternoon, up $0.08 (+0.10%). Year-to-date, TSN has gained 25.08%, versus a 19.31% rise in the benchmark S&P 500 index during the same period.
About the Author: Patrick Ryan
Patrick Ryan has more than a dozen years of investing experience with a focus on information technology, consumer and entertainment sectors. In addition to working for StockNews, Patrick has also written for Wealth Authority and Fallon Wealth Management. More…
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