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Buffalo Wild Wings - A Raw Value Update

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May 07, 2009 – Comments (4) | RELATED TICKERS: BWLD

Back in February, Wax Ink did a small piece on Buffalo Wild Wings, Inc. (Nasdaq: BWLD). The post contained a bit of information about the company, and my worksheet. Now that the company has filed its SEC Form 10-K for fiscal 2008, I thought it would be a good time to update my worksheet.

On the positive side, the company ended the year with $0 Debt, $34.5 million in Cash and Marketable Securities, and a 22% increase in year over year Sales. In addition, Free Cash Flow for fiscal 2008 was $2.07, compared with $1.40 for fiscal 2007, a 48% year over year increase.

On the negative side, the company's Working Capital Ratio declined by 58%, its Quick Ratio declined by 46%, and there was a negligible increase, about 5%, in Return on Invested Capital.

Accordingly I have adjusted my Reasonable Value Estimate for the stock to $35.32, setting my Buy Target at $17.66, my First Sell Target at $34.44, and my Close Target at $37.28.

However, because I believe that the greater economy has not yet seen the full impact of the current economic downturn, I think a lowered entry point for the stock is warranted. Accordingly, I have lowered my Buy Target from $17.66, to $12.24.

Like last year, I still think the PE is too high, ending fiscal 2008 at 17.44, down from 18.03 for fiscal 2007, and as I have said many times, once the PE for a stock climbs above 15, my interest wanes.

So enjoy a cold beer and a few spicy wings anytime you're in the mood, but wait for a cheaper stock price.

Wax

Buffalo Wild Wings2008.pdf

4 Comments – Post Your Own

#1) On May 07, 2009 at 9:47 AM, iamnik77 (95.39) wrote:

I'm a big believer in this company and when it hit $38.00 a share I had to take some profits off of the table. I am boggled by its high PE in a market like this but I haven't sold all of it. My fear is that this is one of those stocks that defies how we all think stocks should be valued until eventually the market cap is five billion and a Buffalo Wild Wings is just two or three miles from almost any home in America. I think it will find its way back below $38.00 but maybe not $17.00 and probably not $12.00.

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#2) On May 07, 2009 at 12:38 PM, wax (97.00) wrote:

iamnik;

My thought is the company is well managed and serving the right market. While expansion is great and I would like to see the company expand, I would rather the company remain debt free, which is one of the main reasons I think the share price has held up so well during this recession.

I learned a long time ago that when management allows a company to progress at its own pace, meaning the company creates a market FIRST, and then moves to fill the market it has created, and it does this without taking on tons of debt, as Krispy Kreme attempted to do several years ago, what investors end up with are 10, 20, and 30 baggers.

At the moment, my perception is this company seems to be doing that very thing.

Wax

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#3) On May 07, 2009 at 1:41 PM, BigFatBEAR (29.10) wrote:

Excellent analysis! CAPS could use more of your breed.

I was short on BWLD in caps for the last few weeks, and just today closed my red-thumb on it. Not interesting to me at these levels.

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#4) On May 07, 2009 at 7:53 PM, wax (97.00) wrote:

Thanx BigFatBEAR for the kind words. I do the best I can with the time I have.

Wax

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