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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: scbeachbum who wrote (76415)	10/23/2024 11:50:50 AM
From: Harshu Vyas	Read Replies (1) \| Respond to of 78708

Not a fan of these restaurant chains. Cash flows are generally ok and most can probably run on negative working capital since they receive payment at the POS and can use their inventory before they pay suppliers etc. What worries me about almost all of them (i.e restaurant chains that have underperformed in recent years) is the debt that has been used to fund historical expansion - how the heck will they ever repay it? Most don't have the earning power that the likes of MCD do even if they can spit out some cash every quarter. And you have to factor in higher rates, too. Interest expense will be a killer for so many zombie companies that could operate in a period of cheap money. I'm sure many leveraged companies will fall over the next decade. At the minute, Wall St continues to throw cash and play the "nice guy" role. Let's see how long it lasts. Watch high yield bond spreads which are currently around 2007 levels @ 2.92%. Far too low and don't think it can stay that low. Yes, rates are coming down, but I think the market's just being too complacent. I watch the RRGB turnaround closely - get the feeling the CEO knows what he's doing. Even then, it's still too speculative for me.

To: scbeachbum who wrote (76415)	10/23/2024 12:07:30 PM
From: Paul Senior	Read Replies (1) \| Respond to of 78708

DIN. At first glance, on some measures, DIN seems to be a better bet than my choice of JACK. I beiieve I'll stick with my few JACK shares because I believe I might be able to follow it easier and I like the fast food concept for tough consumer times vs. chain dining-in. Also DIN seems to have mostly (?) a franchise component, and I don't know how to evaluate that vis-a-vis owning all the stores. (I hold Restaurant Brands (QSR) and Chipotle in an Ackman fund.)

To: scbeachbum who wrote (76415)	10/23/2024 12:10:47 PM
From: bruwin	Respond to of 78708

At a quick glance I'd say that DINE BRANDS (DIN) has a Large Debt problem. Their LTD is ~12x their current LTM Net Income = 1086/92 = ~12. I'd say that number shouldn't be greater than about 3x. That Debt has an Expense which is chewing up about 40% of DIN's Revenue left at its EBITDA level = 74/186 = ~40%. If that number was about 15% of EBITDA = 0.15 x 186 = ~28, then 74 - 28 = ~$46mil. would be available to work its way to DIN's Net Income. Its Pretax Income currently is ~$107mil. Add $46mil. to that = 107 + 46 = 153. Its Tax Rate is about 14%. So there will be about 153 x 0.86 = $132mil. of Net Income. That will give a Bottom Line Profit percentage of 132/821 = 16% compared to its current 92/821 = ~11%. DIN has a healthy Gross Profit of ~48%. But I'd say that it could consider doing something about its SG&A Expense of ~$196mil. which is 196/392 = 50% of its Gross profit, and I'd say that is on the high side. Getting that down to, say, 35% would add about $58mil. of Revenue back into its Income Statement. And the more Net Income there is, the more that gets added to the Left Side of the Balance Sheet Equation via "Retained Income", thereby improving Total Assets relative to Total Liabilities. Chart probably reflects DIN's "Financials" State of Affairs --->