Brinker International, Inc. (EAT): Still A Great Investment

Good Growth, But Fantastic Cash Flow
There might not be a better case for buying Brinker than their free cash flow production. To even the playing field, I look at free cash flow per dollar of sales. In theory, a company with the highest free cash flow from each dollar of sales is the most efficient transforming sales into spendable cash. Using this measure, only McDonald’s does it better by generating $0.15 of free cash flow per dollar of sales. The fact that McDonald’s is heavily franchised and has over 30,000 restaurants might have something to do with this performance. When you compare Brinker to their like sized competition of Chipotle and Panera, Brinker takes the crown. In fact, Brinker generated $0.09 of free cash flow per dollar of sales versus $0.07 at Chipotle and $0.04 at Panera.

Since cash flow helps to fund expansion, share buybacks, and dividends, the importance of Brinker’s free cash flow can’t be understated. The company expects to open about 30-35 international restaurants in 2013. These openings will only add to the company’s already prodigious cash flow. Brinker also retired 8.49% of their diluted share count over the last year. In addition, Brinker only uses about 45% of their free cash flow to cover the dividend. By comparison, McDonald’s uses 65% of their free cash flow. With a 2.4% yield, 13.8% EPS growth, and good cash flow to back them up, Brinker can help investors add some of Chili’s spice to their portfolio. If you are interested in keeping up with Brinker, consider adding EAT to your personalized Watchlist today.

The article Still A Great Investment originally appeared on Fool.com and is written by Chad Henage.

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