An upscale affordable dining chain, Bravo Brio Restaurant Group, Inc. operates through two distinct Italian restaurant brands - BRAVO! Cucina Italiana ("BRAVO!") and BRIO Tuscan Grille ("BRIO"). The company owns over 100 restaurants across 30 states in the U.S.
Notably, this Zacks Rank #1 (Strong Buy) company has good prospects and should make a value addition to your portfolio. You can see the complete list of today’s Zacks #1 Rank stocks here.
Bravo Brio makes for a great pick in terms of growth investment. Arguably, nothing is more important than earnings growth as surging profit levels is often an indication of strong prospects (and stock price gains) ahead for the company in question.
While Bravo Brio has put up a historical EPS growth rate of a whopping 87.8%, compared with the industry average of 10.2%, investors should really focus on the projected growth. Here, the company is looking to grow at a rate of 51%, while the Zacks categorized Retail-Restaurants industry’s average calls for EPS growth of just 7.2% in comparison.
In addition, the company currently has a Growth Score of ‘B’ on our style score system that helps us to identify potential outperformers.
Valuation Looks Reasonable
Bravo Brio 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.
Looking at the sales, the company is currently trading at a P/S ratio of 0.18, much lower than the industry average which stands at 1.24. Some people like this metric more than other value-focused ones because sales are harder to manipulate with accounting tricks than earnings.
Also, the PEG ratio is an important indicator as this metric looks to show investors how much they are paying for each unit of earnings growth. That said, Bravo Brio impresses here too as its PEG is1.34, while the industry’s average is 1.61.
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. Bravo Brio has a P/CF of 2.04, lower than the industry’s average of 9.67.
All these ratios deem the company undervalued in comparison to its industry peers and thus indicate a good time to buy.
Stock Price Movement
Bravo Brio stock is seeing solid activity on the price front right now, leading the company to carry a Momentum Style Score of ‘B’. Shares of Bravo Brio have returned 25% year to date, comparing favorably with the industry, which fell 1.3% in the same time frame. In fact, we noticed that Bravo Brio has outperformed the industry in each of 1-week, 4-week and 12-week time frames as well.
Notably, the stock is trading extremely cheap at under $5 now. 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 Future Estimates
Bravo Brio has beaten/met earnings estimates in seven of the trailing nine quarters.
Furthermore, upward estimate revisions reflect optimism in the stock’s prospects. Full-year 2017 estimates have moved north by 44.4%, over the last two months, reflecting three upward revisions versus none downward. Similarly, 2018 earnings estimates have jumped 188.9% over the past two months, as a result of two upward revisions against none downward.
Investors should however 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 including Brinker International, Inc. (EAT - Free Report) , YUM! Brands, Inc. (YUM - Free Report) , Darden Restaurants, Inc. (DRI - Free Report) , to name a few.
Nevertheless, Bravo Brio is expected to perform well in the quarters ahead based on these fundamentals and we remain hopeful on the stock’s prospects, going ahead.
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