Thanks for the responses to my post.
There seems to be quite a bit of knowledge about Rainforest Cafe on this board, so I'm wondering if anyone can answer any of these questions.
1) Would the Mushroom Bar mini-cafes be franchised, or company-owned, like the full-size cafes? RAIN seems to be growing so rapidly, I don't see how they could handle a large number of smaller units scattered around the country.
2) The Zacks consensus estimate for this quarter is only 8 cents a share, which would represent a decline from 9 cents last year. Although this year's earnings are fully diluted and fully taxed and last year's earnings were based on a tiny number of shares and were not taxed at all, if I was unfamiliar with this company, I would think twice about investing if I saw an earnings decline like that. Any opinions on this issue? I suppose this is already factored into the stock price, since the stock's sideways motion this year seems to predict it.
3) What happened to the tax loss carryforward they had? The 10-Q on their web site seems to contradict itself about this. In one place, they say they had $350,000 in tax credits as of Dec. 31, but in another place they say their tax credits were exhausted as of March 31, but they apparently paid the maximum income tax rate during the quarter. This was the major reason their first quarter EPS number was lower than what I personally expected.
4) Maybe it's just that Rainforest Cafe is still not widely known, but I'm wondering why the stock price is so low relative to their growth prospects. I don't know of any other company with a more clear-cut path to quadruple-digit growth than RAIN. Just the stores that they've already announced represent in excess of 1000% revenue growth from last year, yet the PE has been bouncing around 100 all year. In my opinion, it seems the current PE does not reflect the already announced growth, the not-yet-announced growth, or any other positive events, like possible addition to the Fool Portfolio, or a buyout from a company like Planet Hollywood. In the past, when I've felt this good about a company's prospects, but the stock was not going up, there was usually a good reason for that.
thanks,
--BAT |
