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Non-Tech : RAINFOREST CAFE
RAIN 6.200+11.3%Nov 14 9:30 AM EST
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To: Volcano888 who wrote (3791)1/15/1998 4:32:00 PM
From: dougjn   of 4704
 
I find Rain a great value here. Bought some at avg 23 last May or so. Bought some more today at 17.75.

Anyone interested in buying into Rain or any other eatertainment stock has to understand some things. Firstly, same store sales are not gonna go up in real terms (or nominal ones either in a no inflation environment. The stock grows by opening new restaurants. Period. Secondly, the phenomenal opening success of most all Rain restaurants means that their same store sales will go down for a couple of years, except perhaps in tourist areas where the traffic is mostly new all the time.

That does not mean that same store sales will keep going down after a nomalization period. Whether or not that will happen is I think basically unknown. I suspect there is good reason to believe not. After all, its theme taps into environmental romanticism, which is sorta the secular urban religion in many places all over the developed world. Environmental cartoon environment. Very kids friendly, but not exclusively that. All in all a great concept. That should have quite long legs.

I think the chances of a significantly lower forward PE than we have right now is quite low. Stock has probably seen its PE highs, but some recovery there is likely over time, esp. w/new good Pres.

So the downside is stock over time goes up to keep pace with the earnings rate. 40%? What if earnings growth comes in actually more like 30%? Seems pretty darn good in this market to me.

Doug
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