+ Watch DAVE
on My Watchlist
The Company develops, owns, operates and franchise restaurants.
I can personally say this is a fantastic restaurant with a good environment and staff that is interested in the customer. Add to that stock price cut in half over six months, less than 25% off its 52-wk low, and earnings growth estimated at 23% (PEG well below 1), and this looks like a winner right now.Regarding the top bear pitch, i.e. the only one, as of this writing: The operating costs were a hard hit, and that isn't fixed overnight. It won't go unaddressed, especially with a new CEO. With 50% gross margin, which is well ahead of the industry, they have some wiggle room on this until a cost reduction plan is in place.
I shorted this in short fashion, but I still feel the same about it from what was written in my post. Sounds good, but "cost reduction plan" is another way of saying "charge the customer more." Best of luck with your value play.
In looking at this stock, they took on some significant debt in the last year. Thoughts on how that might impact them going forward?
Learned,Sorry it took a while for me to see this reply. DAVE doesn't seem to have filed its final 2008 10Q yet, but what I see in their other statements is a gradual reduction in long-term debt with a quick spike in short-term debt, which is usually at higher interest rates, to be sure.Other than that, though, I don't see any real signs that the company has turned for the worse. With the huge drop in commodity prices, I'm thinking DAVE will be able to get its margins back up. As long as they can keep the cash coming in, I don't see the debt being a serious issue. The low-end sit-down restaurant sector hasn't taken as big a hit as its higher-priced fellows, from what I am seeing (exceptions noted, *cough* Bennigan's). To me, DAVE just has to ride it out and keep its head on straight.Cheers,NightBengal
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