Reward Investors with Innovation Instead of Stock Buybacks

Jun 8, 2023 | Bubble Monitor, No Bull Economics

Weekly Dashboard

Unemployment claims surged to the highest level since October 2021, exceeding forecasts and sending stocks higher. Precursor to a Fed rate cut? Not likely, especially with a conflicting signal in the form of higher payroll data.

Bubble Monitor Chart
Consumer Stock Monitor

Company Spotlight

While wholesale food supplier, Sysco Corp, has been using a lot of its cash for dividends & stock buybacks, the market has punished its stock relative to its peers who have been less generous to shareholders. Sysco could better serve shareholders by investing more in its own business.

  • Sysco’s financial performance benchmarks evenly against its peer group (Performance Food Group & US Food Holdings) in terms of sales growth, EBITDA margin & leverage levels.
  • All the same, Sysco enjoys greater scale & a significantly higher return on invested capital (ROIC) while also returning a lot more cash to shareholders as outlined below.
  • In any case, the market has punished SYY shares to the point that its EV/LTM EBITDA valuation has dropped from 19x in 2021 to 13x more currently (still slightly ahead of a 12x multiple for US Foods & 10x for Performance Food).   
  • This suggests that Sysco could do better for its shareholders by increasing its cash allocation towards capex (and away from dividends & buybacks) to leverage an ROIC which is 2x+ higher than its competitors. 

Weekly Publications

Public Posts

Relationship Between Sun’s Activity, Earth’s Temperature & the Economy

Weak Freight Demand Reflected in a Material Decline in the Price of Diesel

Who Pays for the Burgeoning Retail Theft Problem?

Premium Posts

Walmart’s Future of the Consumer Conference

Kroger Investor Conference Presentation

Lululemon 1Q23

Costco 3Q23

Walmart’s 6/2/23 Special Call

Marketing Consumer Research Weekly Banner

Nobull consumer research weekly

No Bull Economics

Get Corporate & Market Insights in your inbox