This March, a traditionally strong month for the chain, is bolstered by an exclusive marketing/promotion agreement with the NCAA to make Buffalo Wild Wings the “Official Hangout” of NCAA March Madness.
Despite market sentiment that has kept the stock mired in the mid-$80s Ken Griffin’s Citadel Investment Group reported in their latest 13-F owning a 5.1% stake in Buffalo Wild Wings.
Coming out swinging
Last, but not least, is DineEquity, owner of Applebee’s and IHOP (International House of Pancakes), the value name of this group with a 10.71 P/E and a 4.20% yield. Despite having only a $1.36 billion market cap it has 3,600 restaurants in 17 countries, making it the largest full-service restaurant company in the world. Applebee’s was acquired in 2007 and now is 99% franchised as is IHOP. The company has paid off $1 billion in debt related to that purchase with $1.4 billion remaining.
Chairman and CEO Julia Stewart’s rise to power may be even more unusual than Sally Smith’s. She waited tables at IHOP, worked her up in restaurants to become President of Applebee’s and left after being passed over for CEO. Then she became CEO back at IHOP and bought her former employer, Applebee’s. Revenge is a dish best served a la mode.
Since Smith took over Applebee’s in 2007 90% of the menu items have been improved or replaced. The company has also authorized an $100 million share repurchase. Most of the Applebee’s and IHOP have or will be refurbished to make them fresher as Q4 2012 same store traffic declined, slightly offset by higher tickets.
The 99% franchisee percentage makes DineEquity flush with cash with less volatility. It innovated its supply chain crushing commodity costs using an independent purchasing co-op earning it the #2 spot on Fast Money’s Most Innovative Companies in Food. The company is on track to reduce general and administrative expenses by $10-12 million per year since the 99% franchisee model was attained.
Going forward analysts expect 10% five year EPS growth but return on equity stands at 55.03% and profit margin at 15.02 %. The stock is up 35% over the last year and has been quietly outperforming belying its ticker DIN.
And the winner and champion is…
Not Bloomin’ Brands Inc (NASDAQ:BLMN) simply because of the hedge fund controlling interest as well as its debt. Having the biggest P/E and share price surge puts it on the ropes for valuation.
So close between Buffalo Wild Wings (NASDAQ:BWLD) and DineEquity but that 4.2% yield gambit, lowest P/E, and the franchisee percentage allowing DIneEquity a less cash-intense operation along with generating cash to pay off debt, buy back shares and pay the dividend make DineEquity the winner.
The article Battle of the Lunch (and Dinner) Ladies: A Casual Dining Stocks Competition originally appeared on Fool.com and is written by AnnaLisa Kraft.
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