We came across a bullish thesis on Driven Brands Holdings Inc. (DRVN) on Substack by Ben Tewey. In this article, we will summarize the bulls’ thesis on DRVN. Driven Brands Holdings Inc. (DRVN)’s share was trading at $16.95 as of March 14th. DRVN’s trailing and forward P/E were 114.64 and 14.01 respectively according to Yahoo Finance.
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Driven Brands (DRVN) is at a critical turning point, with the next 18-36 months poised to reshape its trajectory. The company’s core business is stabilizing, and management is refocusing on organic growth, integration, and debt reduction. At the center of this transformation is Take 5 Oil Change, which is set to contribute over 70% of EBITDA by 2026. Despite past missteps, including poor capital allocation and rapid roll-ups that obscured Take 5’s true value, DRVN now presents a compelling investment opportunity. Trading at just 8x NTM EBITDA, the stock has significant upside potential if management successfully executes its strategic priorities, leading to multiple expansion.
DRVN, a $2.3B revenue company generating $550M in EBITDA and $230M in UFCF, has faced setbacks since its 2021 IPO, including management turnover and operational struggles in its car wash and glass segments. The stock plummeted after two CFO departures in a year, exacerbated by disappointing results from non-core businesses. However, these challenges have created an opportunity, as the market has overreacted to the underperformance of the car wash division, which only accounts for 15% of EBITDA and is shrinking. Meanwhile, Take 5 continues to thrive, posting 6% LTM SSS growth and boasting best-in-class unit economics, though its value remains underappreciated due to DRVN’s complex reporting structure.
To unlock value, DRVN must simplify its narrative, allowing investors to fully recognize the strength of its core business. The maintenance segment, which includes Take 5 and Meineke, already contributes 62% of EBITDA and is positioned for sustained growth. Take 5’s quick, high-margin oil change model, supported of 1,007 locations, has significant expansion potential through franchise growth and market penetration. The paint, collision, and glass segment has faced integration hurdles, but the recent consolidation of AutoGlassNow! has laid the foundation for steady long-term growth, particularly in the collision repair space.
The primary overhang on DRVN remains its car wash division, which has weighed heavily on investor sentiment despite its minor role in EBITDA. A sale or restructuring of this business could serve as a major catalyst, eliminating the most visible drag on performance and driving a multiple re-rating. With $6.5B in system-wide sales, 5,100+ stores, and over 70M vehicles serviced annually, DRVN’s scale is undeniable. As Take 5’s contribution to EBITDA continues to grow, the company will shift toward a more stable, high-margin, and high-growth profile, making it easier for investors to appreciate its intrinsic value.
Beyond operational improvements, DRVN’s financial transformation could unlock substantial upside. While its 4.7x net debt-to-EBITDA ratio is a concern, management’s shift from acquisitions to debt reduction should bring leverage down to 3.0x by 2026. Management turnover remains a risk, but the newly appointed CFO, Mike Diamond, has a strong track record in financial restructuring. Roark Capital’s 62% ownership adds another layer of complexity, but its past share sales at nearly double the current price indicate confidence in DRVN’s long-term potential.
Valuation remains highly attractive, with management guiding for $835M in EBITDA by FY26. While sell-side estimates project just $706M, a more realistic forecast suggests $762M, supported by Take 5’s continued expansion and the recovery of AGN. At an 8.5x multiple on 2026 EBITDA, DRVN could reach $27.66 per share, offering a 43.7% IRR. Additionally, planned financial re-segmentation in 2025 will provide greater transparency into Take 5’s standalone value, which, coupled with the likely sale of the car wash segment, could drive a meaningful stock re-rating. Overall, DRVN presents a unique investment opportunity, with multiple catalysts for growth, deleveraging, and operational efficiency, creating a compelling risk/reward profile for long-term investors.
Driven Brands Holdings Inc. (DRVN) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 25 hedge fund portfolios held DRVN at the end of the fourth quarter which was 23 in the previous quarter. While we acknowledge the risk and potential of DRVN as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than DRVN but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.