+ Watch BLMN
on My Watchlist
Some of the best chain restaurants out there. Proven ... steak, fish .... not Burritos or 1600 cal salads
Breakout from cup with handle on increased volume 1/10/13
Debt is to much
For Bloomin, I am looking at the product. In Tampa, if you go into an Outback, Carrabba's, or Bonefish you will pretty much always find a crowd and a wait, especially during peak times. Personally, I think each one of these restaurants offers a superior experience to their respective chain competitors. There is also massive growth potential for Carrabba's and Bonefish domestically, and Outback has shown solid international growth. I live in the southeast, so I see these restaurants, but venture farther away and they become more scarce. Just look at the locations pages for Bonefish Grill and Carrabba's and you will see many states that are not listed...notably California. The company has a frightening level of debt, but they are also on the right side of it. This would scare me away from the stock if I wasn't familiar with the traffic these restaurants generate. Will it beat the S&P? For now yes, especially the way the IPO was low-balled...as of this writing they are above the $15 maximum IPO estimate released with analysts starting to weigh in.
Bloomin' Brands is an incongruous hodgepodge of good and bad. On the one hand, restaurants like Carrabba's, Bonefish Grill, and Outback are all reputable establishments and perhaps a few notches above the Red Lobster/Applebees/etc of the world. But there are a few compelling reasons why buying into this company concerns me. One is, Bain Capital (of Mitt Romney fame) and a partner took this company private as OSI Restaurant partners in 2007 for $41.15 a share. In other words, a $3.24B company became a $1.6B company (as there are difference in share volume). Contrast that with Darden (Red Lobster, Olive Garden, others), which went from ~$42 in 2007 to ~$14 in 2008 to $53.46 today. Shareholders also tacked 3M shares onto the 13M sold in the IPO, which is concerning. There were two recent purchases of around $100K, which is a drop in the bucket compared to the sales, but is nonetheless a positive sign as insider selling could simply be due to the need for diversification. The P/E is 14.6x, which is unreasonably high based on the other metrics, such as 2.69% net profit margin, 0.9 current ratio, and a 21.4 debt to equity, which is unbelievably high. This looks like a bankruptcy in the making, especially compared to Darden, which pays a dividend, has twice the profit margin, the same PE, and a 1.2 debt to equity (but a 0.4 current ratio, which is also concerning). One also has to question what the motivation was for an IPO causing such a loss to original shareholders. Perhaps there were other reasons, but at the very least one could speculate that those selling doubt they'll be able to recoup much more of their initial investment. Long term underperform.
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