Reviewing Sysco (NYSE:SYY) & Costco Wholesale (NASDAQ:COST)

Costco Wholesale (NASDAQ:COST) and Sysco (NYSE:SYY) are both large-cap consumer staples companies, but which is the better business? We will compare the two companies based on the strength of their institutional ownership, risk, earnings, profitability, analyst recommendations, dividends and valuation.

Volatility & Risk

Costco Wholesale has a beta of 0.87, suggesting that its share price is 13% less volatile than the S&P 500. Comparatively, Sysco has a beta of 0.64, suggesting that its share price is 36% less volatile than the S&P 500.

Dividends

Costco Wholesale pays an annual dividend of $5.88 per share and has a dividend yield of 0.6%. Sysco pays an annual dividend of $2.20 per share and has a dividend yield of 2.7%. Costco Wholesale pays out 29.6% of its earnings in the form of a dividend. Sysco pays out 60.1% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Costco Wholesale has raised its dividend for 22 consecutive years and Sysco has raised its dividend for 57 consecutive years. Sysco is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Earnings & Valuation

This table compares Costco Wholesale and Sysco”s gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Costco Wholesale	$275.24 billion	1.53	$8.10 billion	$19.88	47.90
Sysco	$84.55 billion	0.47	$1.76 billion	$3.66	22.45

Costco Wholesale has higher revenue and earnings than Sysco. Sysco is trading at a lower price-to-earnings ratio than Costco Wholesale, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares Costco Wholesale and Sysco’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Costco Wholesale	3.01%	28.04%	10.63%
Sysco	2.08%	95.05%	8.00%

Insider & Institutional Ownership

68.5% of Costco Wholesale shares are held by institutional investors. Comparatively, 83.4% of Sysco shares are held by institutional investors. 0.1% of Costco Wholesale shares are held by insiders. Comparatively, 0.6% of Sysco shares are held by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock will outperform the market over the long term.

Analyst Recommendations

This is a summary of recent ratings for Costco Wholesale and Sysco, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Costco Wholesale	1	11	22	0	2.62
Sysco	1	7	8	0	2.44

Costco Wholesale presently has a consensus target price of $1,059.53, suggesting a potential upside of 11.27%. Sysco has a consensus target price of $89.50, suggesting a potential upside of 8.93%. Given Costco Wholesale’s stronger consensus rating and higher probable upside, analysts plainly believe Costco Wholesale is more favorable than Sysco.

Summary

Costco Wholesale beats Sysco on 12 of the 17 factors compared between the two stocks.

About Costco Wholesale

Costco Wholesale Corporation, together with its subsidiaries, engages in the operation of membership warehouses in the United States, Puerto Rico, Canada, Mexico, Japan, the United Kingdom, Korea, Australia, Taiwan, China, Spain, France, Iceland, New Zealand, and Sweden. The company offers branded and private-label products in a range of merchandise categories. It offers merchandise, such as sundries, dry groceries, candies, coolers, freezers, deli, liquor, and tobacco; appliances, electronics, health and beauty aids, hardware, garden and patio products, sporting goods, tires, toys and seasonal products, office supplies, automotive care products, postages, tickets, apparel, small appliances, furniture, domestics, housewares, special order kiosks, and jewelry; and meat, produce, service deli, and bakery products. The company also operates gasoline, pharmacies, optical, food courts, hearing-aid centers, and tire installation centers; and offers business delivery, travel, grocery, and various other services online. It also operates e-commerce websites. The company was formerly known as Costco Companies, Inc. and changed its name to Costco Wholesale Corporation in August 1999. Costco Wholesale Corporation was founded in 1976 and is based in Issaquah, Washington.

About Sysco

Sysco Corporation, through its subsidiaries, engages in the marketing and distribution of various food and related products to the foodservice or food-away-from-home industry in the United States, Canada, the United Kingdom, France, and internationally. It operates through U.S. Foodservice Operations, International Foodservice Operations, SYGMA, and Other segments. The company distributes frozen food, such as meat, seafood, fully prepared entrées, fruits, vegetables, and desserts; canned and dry food products; fresh meat and seafood products; dairy products; beverages; imported specialties; and fresh produce products. It also supplies various non-food items, including paper products comprising disposable napkins, plates, and cups; tableware consisting of glassware and silverware; cookware, such as pots, pans, and utensils; restaurant and kitchen equipment and supplies; and cleaning supplies. The company serves restaurants, hospitals and nursing facilities, schools and colleges, hotels and motels, industrial caterers, and other foodservice venues. Sysco Corporation was incorporated in 1969 and is headquartered in Houston, Texas.