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Is it Time to Add Diversified Restaurant Holdings (SAUC) Now
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Though the restaurant industry is passing through its worst period since the end of recession, a few players from the same space can offer some respite. Diversified Restaurant Holdings, Inc. is one such company. It is the largest franchisee of Buffalo Wild Wings, Inc. restaurants, with 64 locations across Florida, Illinois, Indiana, Michigan, and Missouri. This Zacks Rank #1 (Strong Buy) company has good prospects and should be value additive to your portfolio. You can see the complete list of today’s Zacks #1 Rank stocks here.
Earnings & Revenue Growth
Diversified Restaurant Holdings is an attractive pick in terms of growth investment. Investors always put the greatest importance on earnings growth as surging profit levels indicate the bright prospects (and stock price gains) of the company in question.
Diversified Restaurant Holdings has a historical (3-5 year) EPS growth rate of a whopping 223.1%, compared with the Zacks categorized Retail-Restaurants industry’s average of 10.2%. Moreover, the stock has a long-term (3-5 years) expected EPS growth rate of roughly 19%, which is higher than the industry average of 14.4%.
The company also boasts historical sales growth (5 years) of 27.5%, compared with the industry average of just 4.6%.
Given such positives, the company currently has a Growth Score of ‘A’ on our style score system. This is quite meaningful as it helps us identify potential outperformers.
Valuation Looks Rational
Diversified Restaurant Holdings has a Value Style Score of ‘B.’ The Value Style Score condenses all valuation metrics into one actionable score that helps investors steer clear of ‘value traps’ and identify stocks that are truly trading at a discount.
A look at the sales figures shows that the company is currently trading at a P/S ratio of 0.39, significantly lower than the industry average which stands at 1.15. Some people prefer this metric over other value-focused ones because sales are harder to manipulate with accounting tricks than earnings.
An often overlooked ratio that can still be an important indicator of value is the price/cash flow metric. This ratio does not take amortization and depreciation into account and therefore, can give a more accurate picture of the financial health of a business. Diversified Restaurant Holdings has a P/CF of 5.70, which is lower than the industry’s average of 9.52.
The PEG ratio is also important as this metric shows investors how much they are paying for each unit of earnings growth. Diversified Restaurant Holdings impresses on this count as well. The company has a PEG ratio of 1.60, while the industry average is 1.65.
Based on these factors, the stock seems to be undervalued than its peers at the moment. Hence, it may be a good idea to invest in Diversified Restaurant Holdings’ stock now.
Stock Price Movement
Diversified Restaurant Holdings stock is seeing solid activity on the price front right now. As a result, the company currently has a Momentum Style Score of ‘B’. Shares of Diversified Restaurant Holdings have returned 73.6% year to date, outperforming the industry’s increase of just 2.3% in the same time frame. In fact, we noticed that Diversified Restaurant Holdings has outperformed the industry in each of 1-week, 4-week and 12-week and 52-week time frames.
Notably, currently the stock is trading extremely cheap at $2.43 per share. This makes it a lucrative buy as it does not require a high amount of investment to be a part of the company’s profits.
Earnings History and Estimate Revisions
Diversified Restaurant Holdings has beaten/met earnings estimates in each of the trailing five quarters with an average beat of 108.33% in the last four quarters.
Furthermore, upward estimate revisions reflect optimism about the stock’s prospects. Analysts have raised earnings estimates for the current quarter and the current year by 100% and 60%, respectively, over the past month.
Bottom Line
Going by these statistics, Diversified Restaurant Holdings is expected to perform well in the quarters ahead. However, investors should be cautious of higher labor costs and investments in initiatives that could hurt the company’s margins. Further, a challenging sales environment is hurting most restaurateurs like Brinker International, Inc. (EAT - Free Report) , Darden Restaurants, Inc. (DRI - Free Report) to name a few, and could deter top-line growth at Diversified Restaurant Holdings too. Nevertheless, we are hopeful on the stock’s prospects as it continues to reflect strength in several areas.
The Best & Worst of Zacks
Today you are invited to download the full, up-to-the-minute list of 220 Zacks Rank #1 ""Strong Buys"" free of charge. From 1988 through 2015 this list has averaged a stellar gain of +25% per year. Plus, you may download 220 Zacks Rank #5 ""Strong Sells."" Even though this list holds many stocks that seem to be solid, it has historically performed 6X worse than the market. See these critical buys and sells free >>
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Is it Time to Add Diversified Restaurant Holdings (SAUC) Now
Though the restaurant industry is passing through its worst period since the end of recession, a few players from the same space can offer some respite. Diversified Restaurant Holdings, Inc. is one such company. It is the largest franchisee of Buffalo Wild Wings, Inc. restaurants, with 64 locations across Florida, Illinois, Indiana, Michigan, and Missouri. This Zacks Rank #1 (Strong Buy) company has good prospects and should be value additive to your portfolio. You can see the complete list of today’s Zacks #1 Rank stocks here.
Earnings & Revenue Growth
Diversified Restaurant Holdings is an attractive pick in terms of growth investment. Investors always put the greatest importance on earnings growth as surging profit levels indicate the bright prospects (and stock price gains) of the company in question.
Diversified Restaurant Holdings has a historical (3-5 year) EPS growth rate of a whopping 223.1%, compared with the Zacks categorized Retail-Restaurants industry’s average of 10.2%. Moreover, the stock has a long-term (3-5 years) expected EPS growth rate of roughly 19%, which is higher than the industry average of 14.4%.
The company also boasts historical sales growth (5 years) of 27.5%, compared with the industry average of just 4.6%.
Given such positives, the company currently has a Growth Score of ‘A’ on our style score system. This is quite meaningful as it helps us identify potential outperformers.
Valuation Looks Rational
Diversified Restaurant Holdings has a Value Style Score of ‘B.’ The Value Style Score condenses all valuation metrics into one actionable score that helps investors steer clear of ‘value traps’ and identify stocks that are truly trading at a discount.
A look at the sales figures shows that the company is currently trading at a P/S ratio of 0.39, significantly lower than the industry average which stands at 1.15. Some people prefer this metric over other value-focused ones because sales are harder to manipulate with accounting tricks than earnings.
An often overlooked ratio that can still be an important indicator of value is the price/cash flow metric. This ratio does not take amortization and depreciation into account and therefore, can give a more accurate picture of the financial health of a business. Diversified Restaurant Holdings has a P/CF of 5.70, which is lower than the industry’s average of 9.52.
The PEG ratio is also important as this metric shows investors how much they are paying for each unit of earnings growth. Diversified Restaurant Holdings impresses on this count as well. The company has a PEG ratio of 1.60, while the industry average is 1.65.
Based on these factors, the stock seems to be undervalued than its peers at the moment. Hence, it may be a good idea to invest in Diversified Restaurant Holdings’ stock now.
Stock Price Movement
Diversified Restaurant Holdings stock is seeing solid activity on the price front right now. As a result, the company currently has a Momentum Style Score of ‘B’. Shares of Diversified Restaurant Holdings have returned 73.6% year to date, outperforming the industry’s increase of just 2.3% in the same time frame. In fact, we noticed that Diversified Restaurant Holdings has outperformed the industry in each of 1-week, 4-week and 12-week and 52-week time frames.
Notably, currently the stock is trading extremely cheap at $2.43 per share. This makes it a lucrative buy as it does not require a high amount of investment to be a part of the company’s profits.
Earnings History and Estimate Revisions
Diversified Restaurant Holdings has beaten/met earnings estimates in each of the trailing five quarters with an average beat of 108.33% in the last four quarters.
Furthermore, upward estimate revisions reflect optimism about the stock’s prospects. Analysts have raised earnings estimates for the current quarter and the current year by 100% and 60%, respectively, over the past month.
Bottom Line
Going by these statistics, Diversified Restaurant Holdings is expected to perform well in the quarters ahead. However, investors should be cautious of higher labor costs and investments in initiatives that could hurt the company’s margins. Further, a challenging sales environment is hurting most restaurateurs like Brinker International, Inc. (EAT - Free Report) , Darden Restaurants, Inc. (DRI - Free Report) to name a few, and could deter top-line growth at Diversified Restaurant Holdings too. Nevertheless, we are hopeful on the stock’s prospects as it continues to reflect strength in several areas.
The Best & Worst of Zacks
Today you are invited to download the full, up-to-the-minute list of 220 Zacks Rank #1 ""Strong Buys"" free of charge. From 1988 through 2015 this list has averaged a stellar gain of +25% per year. Plus, you may download 220 Zacks Rank #5 ""Strong Sells."" Even though this list holds many stocks that seem to be solid, it has historically performed 6X worse than the market. See these critical buys and sells free >>