What’s Cooking at Sonic Corporation (SONC)?

It has launched new products in the value segment like the $1.29 Whooper Junior and 2 for $5 special. It will look to do marketing with more product focused promotions at the national level.

It is re-imaging its stores and has targeted to complete 40% of the stores by the end of the year 2015. Re-imaged stores are lifting the sales up by 10-15% and will drive sales growth in the long term.

Source: Google Finance and Yahoo Finance

Sonic Corporation (NASDAQ:SONC) has reported an operating margin of 10.37% and the lowest one-year forward P/E of 18.35 among the three mentioned peers. Wendy’s has the lowest P/S operating margin of 3.72, but with the highest forward P/E ratio of 26.04. Burger King has the highest operating margin of 31.25% among the peers, but with the highest P/S ratio of 5.51.

Conclusion

Sonic Corporation has a different business model and it has split its marketing efforts between national and local marketing. It has launched new products with new menu platforms this year. It is expected to increase comparable sales in the future with increased national advertising spend and innovative products. Its new POS system rollout and license renewals will drive bottom-line growth of the company in the long term. So, I recommend a Buy for investors with a long-term horizon. 

Ash Sharma has no position in any stocks mentioned. The Motley Fool recommends Burger King Worldwide.

The article What’s Cooking at Sonic? originally appeared on Fool.com and is written by Ash Sharma.

Ash is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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