Shoe Carnival, Inc. (SCVL), Lowe’s Companies, Inc. (LOW): Building a Watch List from Your Shopping Mall

Lowe’s Companies, Inc. (NYSE:LOW) management expects revenue and same store sales to increase 4% this year. With the housing recovery and warmer weather bringing out customers to buy items to work on their houses the company shouldn’t have any problem meeting this goal.

The king of burgers

Your local shopping mall may also include a Burger King Holdings, Inc. (NYSE:BKC). Burger King operates 13,000 restaurants (with 97% franchise ownership) serving millions of people juicy hamburgers and fries.

In 2012, Burger King Holdings, Inc. (NYSE:BKC)’s revenue didn’t fare too well, declining 16%, but cost reductions caused the company to increase net income 34%. The company only paid out 9% of its free cash flow in dividends during 2012. Currently the company pays $0.24 per share per year yielding 1.3% in dividends.

Burger King Holdings, Inc. (NYSE:BKC)’s revenue declined another 43% in its most recent quarter. Heightened competitive activity and tough macroeconomic conditions contributed to the decline. Reduction in cost resulted in an increase in net income of 150%. Burger King Holdings, Inc. (NYSE:BKC) experienced same store sales growth in emerging markets such as Europe, Middle East, and Africa as well as the Asian Pacific region.

Burger King Holdings, Inc. (NYSE:BKC)’s balance sheet leaves much to be desired. While its cash position stands at 50% of stockholder’s equity, Burger King Holdings, Inc. (NYSE:BKC)’s long term debt to equity ratio calculates to a staggering 243%. Its operating income only exceeds its interest expense by two times. The rule of thumb for a margin of safety resides at five time interest expense.

Invest in Burger King with caution.

William Bias owns a share of Burger King. The Motley Fool recommends Burger King Worldwide (NYSE:BKW) and Lowe’s. William is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

The article Building a Watch List from Your Shopping Mall originally appeared on Fool.com is written by William Bias.

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