Food distributor and Motley Fool Income Investor pick Sysco
Fiscal 2007 sales advanced only 7.4%, but Sysco was able to leverage that into a nearly 18% increase in diluted earnings. Such performance is impressive, especially since "food cost inflation" from pricier corn, dairy, and other key ingredients is making life difficult for firms such as Kraft
Sysco's top-line growth stands only slightly below its 8.5% average annual growth over the past five years, but its earnings growth is nearly double the average over this timeframe, suggesting that the company is beginning to return to its heyday of double-digit bottom-line trends. Better yet, operating cash flow improved nearly 25% for the year, far exceeding recent cash flow growth metrics.
Longer-term, "although industry growth has moderated somewhat in recent years," management's goal is to grow sales 7%-9%, and earnings in the low- to mid-double digits. Fellow Fool Rich Smith also recently highlighted Sysco's recent margin improvement. Athough net margins are razor-thin at just less than 2.9%, volume and high asset turnover keep return on invested capital in excess of 20%.
Combine a 2.1% dividend yield with Sysco's industry-leading perch ahead of archrivals such as Aramark, Ahold's
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Fool contributor Ryan Fuhrmann has no financial interest in any company mentioned. Feel free to email him with feedback or to discuss any companies mentioned further. The Fool has an ironclad disclosure policy.