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4 Reasons Why You Should Buy Fogo de Chao (FOGO) Stock Now
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According to the latest Black Box Intelligence Report, cautious optimism has resurfaced for the restaurant industry, heading into second quarter 2017. This follows a prolonged period of difficulty in the space and the industry’s worst period since the end of recession. We believe that one restaurant stock that can help you gain an upper hand right now is Fogo de Chao, Inc. . This Zacks Rank #2 (Buy) company has fine prospects and should make a value addition to your portfolio.
Earnings & Revenue Growth
Arguably, nothing is more important than earnings growth as surging profit levels are often an indication of strong prospects (and stock price gains) ahead for the company in question.
On this front, Fogo de Chao has put up a historical (3-5 year) EPS growth rate of nearly 7%. Moreover, the stock also has a long-term (3-5 years) expected EPS growth rate of roughly 14.7%, slightly higher than the Zacks categorized Retail-Restaurants industry average of 14.4%.
Meanwhile, the company’s sales are also expected to increase 10.6% in the current fiscal year compared with the industry average of just 2%.
Valuation Looks Reasonable
Fogo de Chao has a Value Style Score of ‘A’ on our style score system that helps us to identify potential outperformers. This 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.
The company is currently trading at a trailing 12-months P/E multiple of 16.61, while the industry’s average stands at 27.78. Moreover, its forward P/E ratio (price compared with this year’s earnings) is pegged lower at 15.06. This indicates that a slightly more value-oriented path may be ahead for Fogo de Chao.
An often overlooked ratio that can still be a great indicator of value is the price/cash flow metric. This ratio doesn’t take amortization and depreciation into account, so can give a more accurate picture of the financial health in a business. Fogo de Chao has a P/CF of 7.07, lower than the industry’s average of 10.23.
The PEG ratio is also an important indicator as this metric looks to show investors how much they are paying for each unit of earnings growth. Fogo de Chao impresses here too as its PEG is pegged at 1.03, while the industry’s average is 1.86.
Notably, all these ratios deem the company undervalued in comparison to its industry peers and indicate a good time to buy.
Low Beta Stock
A stock with beta less than 1 suggests that the price movement of the stock is not highly correlated with the market. Since they are less volatile than the market, they are safer bets at the moment. Fogo de Chao has an impressive beta of 0.38. Adding it to your portfolio brings down your portfolio’s overall beta considerably, thereby reducing its risk.
Estimate Revisions
We note that the company has beaten/met earnings estimates in six of the eight reported quarters, since its IPO in June 2015.
Further, upward estimate revisions reflect optimism in the stock’s prospects. Current quarter estimates have moved north by 4.5% over the last month, reflecting two upward revisions versus none downward. Similarly, current year estimates have increased 2.2% in the same time period, as a result of two upward revisions against none downwards.
However, this decidedly bullish trend is not yet reflected in its price, as the stock gained only 3% over the last year.
Nonetheless, you should not be concerned about the price remaining muted going forward, given the strong fundamentals which should ultimately translate into price appreciation.
Other Stocks to Consider
Here are some other favorably ranked stocks in the restaurants space you can also consider:
Red Robin Gourmet Burgers, Inc. (RRGB - Free Report) is a Zack Rank #1 (Strong Buy) company. Its earnings have beaten/met estimates in three of the trailing four quarters, recording an average positive surprise of 17.27%.
Diversified Restaurant Holdings, Inc. carries a Zacks Rank #2. Its earnings have beaten/met estimates in all of the trailing four quarters, recording an average positive surprise of 48.83%.
Del Taco Restaurants, Inc. is another Zacks Rank #2 company whose earnings have surpassed/met estimates in three of the trailing four quarters with an average positive surprise of 5.69%. You can see the complete list of today’s Zacks #1 Rank stocks here.
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4 Reasons Why You Should Buy Fogo de Chao (FOGO) Stock Now
According to the latest Black Box Intelligence Report, cautious optimism has resurfaced for the restaurant industry, heading into second quarter 2017. This follows a prolonged period of difficulty in the space and the industry’s worst period since the end of recession. We believe that one restaurant stock that can help you gain an upper hand right now is Fogo de Chao, Inc. . This Zacks Rank #2 (Buy) company has fine prospects and should make a value addition to your portfolio.
Earnings & Revenue Growth
Arguably, nothing is more important than earnings growth as surging profit levels are often an indication of strong prospects (and stock price gains) ahead for the company in question.
On this front, Fogo de Chao has put up a historical (3-5 year) EPS growth rate of nearly 7%. Moreover, the stock also has a long-term (3-5 years) expected EPS growth rate of roughly 14.7%, slightly higher than the Zacks categorized Retail-Restaurants industry average of 14.4%.
Meanwhile, the company’s sales are also expected to increase 10.6% in the current fiscal year compared with the industry average of just 2%.
Valuation Looks Reasonable
Fogo de Chao has a Value Style Score of ‘A’ on our style score system that helps us to identify potential outperformers. This 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.
The company is currently trading at a trailing 12-months P/E multiple of 16.61, while the industry’s average stands at 27.78. Moreover, its forward P/E ratio (price compared with this year’s earnings) is pegged lower at 15.06. This indicates that a slightly more value-oriented path may be ahead for Fogo de Chao.
An often overlooked ratio that can still be a great indicator of value is the price/cash flow metric. This ratio doesn’t take amortization and depreciation into account, so can give a more accurate picture of the financial health in a business. Fogo de Chao has a P/CF of 7.07, lower than the industry’s average of 10.23.
The PEG ratio is also an important indicator as this metric looks to show investors how much they are paying for each unit of earnings growth. Fogo de Chao impresses here too as its PEG is pegged at 1.03, while the industry’s average is 1.86.
Notably, all these ratios deem the company undervalued in comparison to its industry peers and indicate a good time to buy.
Low Beta Stock
A stock with beta less than 1 suggests that the price movement of the stock is not highly correlated with the market. Since they are less volatile than the market, they are safer bets at the moment. Fogo de Chao has an impressive beta of 0.38. Adding it to your portfolio brings down your portfolio’s overall beta considerably, thereby reducing its risk.
Estimate Revisions
We note that the company has beaten/met earnings estimates in six of the eight reported quarters, since its IPO in June 2015.
Further, upward estimate revisions reflect optimism in the stock’s prospects. Current quarter estimates have moved north by 4.5% over the last month, reflecting two upward revisions versus none downward. Similarly, current year estimates have increased 2.2% in the same time period, as a result of two upward revisions against none downwards.
However, this decidedly bullish trend is not yet reflected in its price, as the stock gained only 3% over the last year.
Nonetheless, you should not be concerned about the price remaining muted going forward, given the strong fundamentals which should ultimately translate into price appreciation.
Other Stocks to Consider
Here are some other favorably ranked stocks in the restaurants space you can also consider:
Red Robin Gourmet Burgers, Inc. (RRGB - Free Report) is a Zack Rank #1 (Strong Buy) company. Its earnings have beaten/met estimates in three of the trailing four quarters, recording an average positive surprise of 17.27%.
Diversified Restaurant Holdings, Inc. carries a Zacks Rank #2. Its earnings have beaten/met estimates in all of the trailing four quarters, recording an average positive surprise of 48.83%.
Del Taco Restaurants, Inc. is another Zacks Rank #2 company whose earnings have surpassed/met estimates in three of the trailing four quarters with an average positive surprise of 5.69%. You can see the complete list of today’s Zacks #1 Rank stocks here.
Looking for Stocks with Skyrocketing Upside?
Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.
Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look. See the pot trades we're targeting>>