P.F. Chang's China Bistro (NASDAQ:PFCB)

CAPS Rating: 1 out of 5

Owner and operator of a number of full service restaurants that feature a blend of high quality, traditional Chinese cuisine and American hospitality in a contemporary bistro setting.

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Player Avatar TMF1000 (99.69) Submitted: 5/6/2011 11:49:37 AM : Outperform Start Price: $38.54 PFCB Score: +29.21

They reported $0.46 per share for the quarter. But during the quarter several restaurants were closed due to identity theft. This cost the company $0.04 per share for the quarter. This will be a temporary problem. But they expect this to affect them further in 2011. They also said commodity prices are going up. I think the lower oil prices should help some and many commodities are going down which should positively affect food costs for them – hopefully.

They are still growing well and their PE of 18 is fair enough. I dropped them from Caps after the report but the 11% drop in my opinion was plenty of a discount to re-up it in Caps.

They pay out a varying dividend which is capped at 45% of net earnings. In the quarter, they paid to shareholder $0.21. In the fourth quarter it was $0.29. Next quarter it could be higher or lower. But it should remain a healthy dividend.

They produced $85 million or about $3.70 per share in cash flow for fiscal 2010. I think that is very impressive considering it also included capital expenditures of $39 million, though down from about $49 million last year.

I was able to get the price of 39.43 on caps that is a PE of 18.78 and a cash flow yield of 10.7% based on TTM cash flow per share of $4.22 at the end of the first quarter 2011. Cash flow for the quarter was $14.4 million up from $2.9 million last year even though they spent about the same amount in capital expenditures.

They have only 201 Bistro restaurants and 171 Pei Wei restaurants. They are funding growth through cash flow. I think they have some interesting growth potential.

They have only $1.2 million in debt and $72 million in cash. CAKE PE is 22.48 which is higher than PFCB 18.78. I don't think they will have an trouble beating the S&P500 in the next five years if oil prices behave.

This is one restaurant stock I don't own yet, but it is one I think I will add. I haven't done a very close study of them though I have been watching them for many years. Does anyone have additional information on them?

tom e

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Member Avatar anuragupta (80.53) Submitted: 5/10/2011 10:42:13 AM
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Took my first position here.

Anurag

Member Avatar itconsultant (55.10) Submitted: 6/5/2011 6:19:18 PM
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The first thing I notice is that depreciation and amortization is much higher than capex. As a result, Cash Flow from operations is double reported net income. I prefer cash flow to reported net income. On that measure the stock is trading at less than 10x cash earnings. As Tom pointed out there is some growth capex. So, for such companies I prefer to look at P/Cash Flow and its like 7x or so.

Then, I see what the company is doing with the free cash flow ( after paying for growth and maintenance capex). They paid $16 million in dividends last year and will pay about $20 million this year. Another $40 million was used in buybacks. They plan to utilize about $60 million this year to complete the buyback authorization. That would still leave some money that would add to the balance sheet.

Management has slowed down restaurant count expansion. May open 2 - 3 Bistros and 5 Pei Weis. However, their franchising partners may open 7-10 Bistros this year. They have licensin in Mexico and UAE already. *- 7 open there combined. New franchises allotted in Canada and S.America. In all 80 restaurants are slated to open in next 10 years in these locations.

I am not sure what is the number of restaurants they can sustain profitably in the US.

I like managements actions. I like the balance sheet. There is no debt and excess cash. I like the cash flows.
I like the dividend payout about 2.3%. I like the buybacks. I would like to hear from the bears...

Member Avatar TMF1000 (99.69) Submitted: 5/1/2012 10:58:55 AM
Recs: 1

Canterbridge Partners takes PFCB private

PFCB will be taken private for a price of $51.50
Price to sales was .68
Earnings were 1.20 after earnings dropped giving them a PE Of - PE 42.92
The PE ratio isn't the best metric to use when valuing restaurant stocks, so I tend to switch to the cash flow yield ratio.

They made $63.79 million in cash flow in 2012 or $2.93 per share.

After the first quarter, they made $2.75 per share for a cash flow yield of 5.3%.

The 5.3% made them cheap and they also paid a $1.10 dividend. This one would have been a good buy for Biglari holdings. It produces gobs of cash flow. And I feel it would have been a snap to turn around. I like the food. It was reasonably priced.

Member Avatar buylowersellhigh (58.72) Submitted: 5/1/2012 11:13:00 AM
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Tom,

Any thoughts on BJRI after the quarter?

BLSH

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