Red Robin Gourmet Burgers, Inc. (NASDAQ:RRGB)

CAPS Rating: 3 out of 5

The Company develops and operates casual-dining restaurants.

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Member Avatar TMFFlygal (98.71) Submitted: 3/2/2016 9:36:18 PM : Outperform Start Price: $66.83 RRGB Score: -6.74

What TMFPencils said

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Member Avatar TMFPencils (99.83) Submitted: 3/1/2016 3:55:28 PM : Outperform Start Price: $66.02 RRGB Score: -6.15

RRGB is currently trading at a P/E of 19.4, which has typically been an opportune point to pick up the stock. RRBG has a total of 538 restaurants, of which 439 are company-owned and 99 are franchised. The bulk of the company's location growth over the past six years has come through company-owned locations.

In 2010 and 2011 the company had new leadership step in, and since that point the company's efficiency has noticeably improved. The gross margin is up to 23.5% from 19.5% in 2010. Over the same time period, net income margin increased from 0.8% to 3.8% and the restaurant-level operating margin increased from 1.1% to 5.3%. Sales continue to grow at an ~8% pace annually, and same-store-sales are coming in between 2% and 5%. These are respectable numbers, and they should continue thanks to ongoing initiatives from management.

Management's initiative is called RED 2, with the goal to double EBITDA by 2020. This initiative focuses on revenue growth (R), expense management (E), and efficient capital deployment (D).

For revenue growth, management is looking to increase seating efficiency and reduce guest ticket times. Currently the restaurants enjoy an average seating efficiency of about 70% and a guest ticket times of 55 minutes. Management thinks a new kitchen display system this year (linked to table management software) will bring those numbers to 80% and 45 minutes, respectively. This management team has a good track record improving efficiency up to this point, so I trust their plans.

For expenses, this year the company is piloting a new supply chain management software. This software should free up a lot of time for the company's general managers, leaving more time for working directly with employees and restaurant guests. This software should contribute to improved margins starting in 2017.

For capital deployment, much of management's focus has been on undertaking brand transformation remodels in its company-owned restaurants (with franchises closely following). Ongoing investments will be made in restaurant-level technology that should make the overall operation even more efficient in the years ahead. Currently FCF is negative (due to higher CapEx), but management forecasts that FCF will significantly increase starting in 2017 as a result of these brand transformation investments.

The biggest risk I see is if these investments fall short and the company fails to increase higher FCF starting in 2017 and beyond. The balance sheet isn't the strongest with a net debt position of $180.2 million, but I'm optimistic that management's investments back into the company will be worthwhile and lead to improved efficiency and cash flow generation.

One master rollout the company has completed is with Ziosk (which the company calls Robin), a technology which allows restaurant guests to pay at their table. This makes the guest experience faster and more enjoyable (you don't have to wait on a waiter or waitress to come to your table to grab and process the check, etc.) and makes the dining experience more efficient for RRGB and its employees.

I really like to see management's technology-driven focus, utilizing technology to boost the efficiency of RRBG both on a restaurant and system-wide level. This focus from management has already paid off over the past 5-6 years: the stock is up nearly 173% vs 51% for the S&P 500 over the past five years. Given the stock's relatively low valuation today, and a management team focused on driving long-term efficiency and cash flow production, I think that market-beating performance will continue.

Outperform.

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Member Avatar LifeScientist (22.47) Submitted: 2/17/2016 9:39:36 AM : Outperform Start Price: $63.89 RRGB Score: -6.40

good dream for sales and appreciation

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Member Avatar FairfaxMike (< 20) Submitted: 4/27/2015 5:19:37 AM : Outperform Start Price: $83.31 RRGB Score: -19.32

Great product line now utilizing Ziosk tablets. People love tablets!

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Member Avatar mountpaul (< 20) Submitted: 4/2/2015 1:43:43 PM : Underperform Start Price: $86.19 RRGB Score: +24.77

Yes they are slowly adding locations, but as a former frequent visitor I see a high turnover in staffing. Most of what they serve doesn't really fall in the 'healthy eating' arena (having a salad with your big burger and endless fries doesn't count as healthy). I feel they rose too fast in 2014-2015 and will soon settle back down in the 40 range.

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Member Avatar hba24 (89.16) Submitted: 4/2/2014 11:36:24 PM : Outperform Start Price: $72.93 RRGB Score: -20.14

I find myself getting a burger from RRGB more often than I'd care to admit--there must be something to that.

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Member Avatar TMFEBCapital (44.23) Submitted: 7/5/2013 12:03:08 PM : Outperform Start Price: $57.56 RRGB Score: -14.40

A solid business model based on casual fare and specialty drinks makes Red Robin a good option for hungry back-to-school shoppers.

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Member Avatar SoMch2Knw (87.04) Submitted: 3/7/2013 1:13:39 PM : Outperform Start Price: $45.27 RRGB Score: +10.05

Casual dining experience w/a staple of the U.S. diet as...

http://stockcharts.com/freecharts/candleglance.html?rrgb,bwld,dri,eat,sonc,mcd

...the centerpiece of the menu. And booze, whats not to love.

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Member Avatar Winks13 (39.17) Submitted: 2/6/2013 10:54:48 AM : Outperform Start Price: $36.45 RRGB Score: +41.31

The next big burger chain

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Member Avatar robepete (51.05) Submitted: 11/9/2012 11:17:10 AM : Outperform Start Price: $31.49 RRGB Score: +57.10

their new burger works was a needed change and makes them very competitive as an established player even in heavily competitive area

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Member Avatar kurzzz (47.31) Submitted: 6/17/2011 10:00:19 AM : Underperform Start Price: $34.13 RRGB Score: -28.65

Have anyone really eat at that place?? Red Robin burgers are NOT that great. We swore we would not spend that much money on those Checkers-qualified burgers ever again.

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Member Avatar MechanicalBull1 (74.45) Submitted: 5/31/2011 11:44:49 AM : Outperform Start Price: $38.00 RRGB Score: +16.90

valueline

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Member Avatar DanPoz (60.06) Submitted: 5/4/2011 1:44:32 PM : Outperform Start Price: $27.26 RRGB Score: +84.82

burgers good

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Member Avatar bodiebear (71.89) Submitted: 2/8/2011 12:30:57 PM : Outperform Start Price: $20.69 RRGB Score: +157.62

reb robin... yum

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Member Avatar TMFmd19 (81.00) Submitted: 1/29/2011 6:51:43 PM : Outperform Start Price: $20.85 RRGB Score: +149.97

Activist investors should unlock value and push this stock much higher.

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Member Avatar mj10275 (< 20) Submitted: 1/12/2011 4:50:59 PM : Outperform Start Price: $21.92 RRGB Score: +135.49

rrgb

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Member Avatar TMFRisingStars (24.37) Submitted: 12/31/2010 9:07:56 AM : Outperform Start Price: $21.45 RRGB Score: +138.01

Here's the buy rec:
http://www.fool.com/investing/general/2010/12/30/rising-star-buy-red-robin-gourmet-burgers.aspx

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Member Avatar alan5757 (< 20) Submitted: 12/27/2010 10:27:20 AM : Underperform Start Price: $21.57 RRGB Score: -136.20

P/E too high for a restaurant stock.

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Member Avatar MessyBurrito (34.66) Submitted: 4/21/2009 3:31:36 AM : Outperform Start Price: $21.16 RRGB Score: +54.79

Always jammed pact, its got a niche for hosting parties and fun for the whole family.

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Member Avatar EFmcdowell (98.12) Submitted: 11/23/2008 10:38:10 PM : Underperform Start Price: $9.12 RRGB Score: -453.44

Dog of a business

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