With the resurgence of COVID-19 cases limiting traditional dining, the restaurant industry witnessed a setback. The National Restaurant Association’s Restaurant Performance Index (RPI) dropped to a 6-month low in August at 104.2, down 1.1% from 105.4 in July.
However, as several restaurants are adopting advanced technologies and increasing digital offerings to adjust to the new normal, the industry should witness solid sales growth this year and beyond. According to the National Restaurant Association, food and beverage sales in the restaurant and foodservice industry are expected to be $789 billion in 2021, up 19.7% year-over-year.
So, it may be wise to bet on fundamentally strong restaurant stocks such as Dine Brands Global, Inc. (DIN), Chuy’s Holdings, Inc. (CHUY), and RCI Hospitality Holdings, Inc. (RICK). They have a ‘Strong Buy’ rating in our POWR Ratings system along with an A or B grade for Quality.
Dine Brands Global, Inc. (DIN)
DIN owns, franchises, operates, and rents full-service restaurants globally. Its five segments include Applebee’s Franchise Operations, IHOP Franchise Operations, Rental Operations, Financing Operations, and Company-Operated Restaurant Operations.
DIN announced its expansion on August 16, 2021, with IHOP Non-Traditional Restaurant Franchisee Deal with K2 Group. DIN’s President Tony Moralejo said, “We are pleased to push forward with our international expansion plans and believe working with the K2 Group team, along with our existing franchisee team in the market; will create the perfect opportunity to successfully build and grow our portfolio across Ontario.”
DIN’s total revenues increased 112.9% year-over-year to $233.62 million in the second quarter that ended June 30, 2021. Its gross profit came in at $98.88 million, up 228.3% year-over-year. Its net income for the quarter came in at $29.36 million compared to a $134.78 million loss in the year-ago period. Also, its EPS came in at $1.69 compared to a loss per share of $8.33 in the prior-year period.
In terms of trailing-12-month gross profit margin, DIN’s 39.88% is 11.1% higher than the industry average of 35.90%. In addition, the stock’s trailing-12-month EBITDA margin and net income margin of 24.70% and 7.83% are higher than the industry averages of 12.81% and 6.29%, respectively.
Analysts expect DIN’s revenue and EPS to increase 26.6% and 269.8% year-over-year to 872.31 million and $6.62, respectively, in the current year. In addition, it has surpassed the consensus EPS estimates in each of the trailing four quarters. Over the past nine months, the stock has gained 47.5% to close yesterday’s trading session at $84.89.
DIN’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall grade of A, which indicates a Strong Buy rating in our proprietary ratings system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
Chuy’s Holdings, Inc. (CHUY)
CHUY, through its subsidiaries, owns and operates full-service restaurants under the Chuy’s brand name across 17 states, including the Southeastern and Midwestern United States. The company has around 92 restaurants to date.
CHUY launched its Brentwood restaurant on August 24, 2021. Lee Spelta, the local owner and operator of Chuy’s Brentwood, said, “Ever since our sign went up on Old Hickory Boulevard, we’ve heard from many residents and others who work in the area about how excited they are to have Chuy’s in Maryland Farms. We’re thrilled to be able to make our popular Tex-Mex favorites more convenient to those in Brentwood and South Nashville.”
For the fiscal second quarter that ended June 27, 2021, CHUY’s revenue increased 64.6% year-over-year to $108.15 million. The company’s net income came in at $11.53 million, up 156.1% year-over-year. Also, its EPS came in at $0.57, representing a 119.2% year-over-year rise.
In terms of trailing-12-month levered FCF margin, CHUY’s 14.01% is 92.8% higher than the industry average of 7.27%. Also, the stock’s trailing-12-month EBITDA margin and net income margin of 13.78% and 6.39% are higher than the industry averages of 12.81% and 6.29%, respectively.
CHUY’s revenue is expected to be $399.22 million in fiscal 2021, representing a 24.4% year-over-year rise. The company’s EPS is expected to increase 108.3% year-over-year to $1.75 in the current year. Also, it surpassed Street EPS estimates in each of the trailing four quarters. Over the past nine months, the stock has gained 25.5% to close yesterday’s trading session at $32.12.
It’s no surprise that CHUY has an overall grade of A, which equates to a Strong Buy rating in our proprietary ratings system. In addition, it has an A grade for Growth, and a B grade for Value, Momentum, and Quality.
CHUY is ranked #3 in the same industry. Click here to see the additional grades for CHUY (Stability and Sentiment).
RCI Hospitality Holdings, Inc. (RICK)
RICK engages in hospitality and related businesses and operates through Nightclubs; Bombshells; and other segments. The company owns and operates upscale adult nightclubs. In addition, it operates restaurants and sports bars under the Bombshells Restaurant & Bar brand; and dance clubs under the Studio 80 brand.
On August 5, 2021, RICK’s President and CEO, Eric Langan, said, “We continue to press ahead with our growth initiatives. Recently we announced an agreement to acquire 11 clubs in six states and related real estate for $88.0 million in stock, cash, and debt. In addition, we are seeking out more nightclub acquisitions, developing more Bombshells, and expanding our list of potential Bombshells franchise locations.”
RICK’s total revenues increased 293% year-over-year to $57.86 million for the fiscal third quarter that ended June 30, 2021. Its income from operations came in at $18.51 million compared to a $4.66 million loss in the prior year’s quarter. Its net income came in at $12.3 million compared to a $5.47 million loss in the year-ago period, while its EPS came in at $1.37 compared to a $0.60 loss per share in the prior-year period.
In terms of trailing-12-month gross profit margin, RICK’s 82.92% is 130.9% higher than the industry average of 35.90%. In addition, the stock’s trailing-12-month EBITDA margin and net income margin of 27.62% and 14.93% are higher than the industry averages of 12.81% and 6.29%, respectively.
For fiscal 2021, RICK’s revenue and EPS are expected to grow 47.9% and 523.5% year-over-year to $195.75 million and $3.18, respectively. In addition, it surpassed the consensus EPS estimates in each of the trailing four quarters. Over the past six months, the stock has gained 11.8% to close yesterday’s trading session at $70.34.
RICK’s strong fundamentals are reflected in its POWR ratings. The stock has an overall grade of A, which equates to a Strong Buy rating in our proprietary ratings system.
In addition, it has an A grade for Quality, and a B grade for Growth, Sentiment, and Momentum. RICK is ranked #2 in the same industry. Click here to see RICK’s grades for Stability and Value as well.
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DIN shares were trading at $84.63 per share on Tuesday afternoon, down $0.26 (-0.31%). Year-to-date, DIN has gained 45.91%, versus a 17.30% rise in the benchmark S&P 500 index during the same period.
About the Author: Riddhima Chakraborty
Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries. More...
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