Like the Steaks, Ruth's (RUTH) Shares are Looking Good - Barron's
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Ruth's Hospitality (Nasdaq: RUTH) shares are sizzling Monday following a bullish report from Barron's over the weekend.
Though shares got smacked during the financial fallout of 2008 and 2009, Ruth's $92 million purchase of upscale seafood chain Mitchell's has the company beginning to regain a footing as the U.S. economic shows signs of improvement.
Ruth's isn't a terribly global company, with just 14 outlets outside the U.S. Consequently, the U.S. economy plays an exceptional role in its success or failure. Comps have risen comfortably over the last several quarters, and shares have gotten to the $6.40 mark, after trading below $1 in March 2009.
After reporting net income of 35 cents per share on sales of $357.6 million last year, Ruth's earnings for 2011 are expected to be relatively flat at 37 cents per share. Barron's notes the stock is going for less than 1x estimates.
What's more is that revenue per restaurant is at levels about 20 percent below its peak in 2006 - 2007. Also, EBITDA margins at 11.3 percent have room to grow in getting to the 16.4 percent level last reported in 2005.
And expansion doesn't have to be a key factor in improving numbers. One analyst reminds us things like labor, utilities, and rent are fixed for the most part, meaning any gain in revs will add noticeably to the bottom line. With an 8-9x valuation, and EBITDA of $49.2 million, Ruth's could get to $9.21 to $10.32 later in 2012, the analyst concluded.
When compared with peer Morton's Restaurant (NYSE: MRG), Ruth's may command a stronger multiple. Of it's 131 steakhouses, about 67 are franchised. Morton's, on the other hand, owns all 77 of its units. Morton's currently goes for an enterprise value-to-EBITDA of 9.2x, versus 7.7x for Ruth's.
Further increases in business spending, which accounts for about 33 percent of Ruth's revs, will also help metrics out a ton.
In early 2012, Ruth's will be able to convert $25 million of convertible bonds into common shares, saving the company about $2.5 million in the process on annual dividend, Barron's notes. The lingering factor is whether or not Ruth's will be able to get above the $6.53 per share required for such conversion.
But at this rate, it may be a hard dish to pass.
Shares are up over 1.4 percent even as stocks are selling off sharply Monday.
Though shares got smacked during the financial fallout of 2008 and 2009, Ruth's $92 million purchase of upscale seafood chain Mitchell's has the company beginning to regain a footing as the U.S. economic shows signs of improvement.
Ruth's isn't a terribly global company, with just 14 outlets outside the U.S. Consequently, the U.S. economy plays an exceptional role in its success or failure. Comps have risen comfortably over the last several quarters, and shares have gotten to the $6.40 mark, after trading below $1 in March 2009.
After reporting net income of 35 cents per share on sales of $357.6 million last year, Ruth's earnings for 2011 are expected to be relatively flat at 37 cents per share. Barron's notes the stock is going for less than 1x estimates.
What's more is that revenue per restaurant is at levels about 20 percent below its peak in 2006 - 2007. Also, EBITDA margins at 11.3 percent have room to grow in getting to the 16.4 percent level last reported in 2005.
And expansion doesn't have to be a key factor in improving numbers. One analyst reminds us things like labor, utilities, and rent are fixed for the most part, meaning any gain in revs will add noticeably to the bottom line. With an 8-9x valuation, and EBITDA of $49.2 million, Ruth's could get to $9.21 to $10.32 later in 2012, the analyst concluded.
When compared with peer Morton's Restaurant (NYSE: MRG), Ruth's may command a stronger multiple. Of it's 131 steakhouses, about 67 are franchised. Morton's, on the other hand, owns all 77 of its units. Morton's currently goes for an enterprise value-to-EBITDA of 9.2x, versus 7.7x for Ruth's.
Further increases in business spending, which accounts for about 33 percent of Ruth's revs, will also help metrics out a ton.
In early 2012, Ruth's will be able to convert $25 million of convertible bonds into common shares, saving the company about $2.5 million in the process on annual dividend, Barron's notes. The lingering factor is whether or not Ruth's will be able to get above the $6.53 per share required for such conversion.
But at this rate, it may be a hard dish to pass.
Shares are up over 1.4 percent even as stocks are selling off sharply Monday.
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