There are certain stocks that a value guy is just supposed to like. I mean, once you enroll in the fan club, you're expected to buy stocks such as Fannie Mae
Performance has never really been the issue for me at SYSCO, and that's true in this fiscal second quarter as well. Sales were up almost 9% (a bit more than 7% organically), and that's fine. I also like that the new redistribution center for the Northeast is ramping up, and I was impressed to hear that the company did another 8,500-odd customer reviews, reaping mid-teens growth on average from those customers as a result.
Heck, I'm not even that bothered by the margin and profitability picture. Gross margin was up 19 basis points, but the operating margin dropped a bit because of stock option expense. That translated into a 7% drop in net income and a 12% drop in reported earnings.
What about market share? Well, if I'm reading the company's table correctly, they lost a little bit of share in the quarter to other distributors. But the loss wasn't really anything to get too concerned about. Simply put, I don't see Royal Ahold
Yet I still don't want the stock at today's prices. Even granting the company an 18% structural free cash flow growth estimate for the next five years (and 12% for the five years following), I get a price target in the $34 range. So I might stand to gain 5% plus dividends? Oh, yippee.
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Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares). Fannie Mae and Coca-Cola are Inside Value recommendations. The Fool has a disclosure policy.
