Rubio's Restaurants, Inc. (RUBO)

koona (54.89) Submitted: 10/7/2007 12:56:06 PM : Start Price: $10.69 RUBO Score: +5.59

The Bullish pitch is that they are revamping their restaurants to a Chipotle or Panera dining experience vs the former Cal-Surf aka Taco Bell look ...basically going upscale. If you happen to follow restaurants; this is a tall order -- if successful you keep your old customers and get new ones. Rubios has been around for so long and the idea of upscaling it seems problematic. If they actually had franchises opening up in a totally new market that never heard of Rubios and execute this plan -- it might actually work. With the present plan they have to show it works and bring in some good numbers and offset the expenses they occur for their stock to move upward.

richmouse (34.72) Submitted: 10/6/2007 2:52:45 PM : Start Price: $10.69 RUBO Score: -5.59

I got to get Money together to bid on this one . Darn all the good go up before this stock surf can catch a good wave.

ikkyu2 (94.77) Submitted: 8/29/2007 3:48:06 PM : Start Price: $10.76 RUBO Score: -10.81

PROS:

a) I love this place. I make a point of eating here every time I'm near one.

b) It's affordable, kid-friendly, fast, and healthy. Name me one other publically-traded chain you can think of that meets all of these criteria. (Can't think of any? Neither can I.)

c) People are becoming really unwilling to poison their kids with McD's, and there are billions spent by the Federal government - CDC, NIH - on public awareness campaigns to encourage healthier eating for kids. Those billions help RUBO and hurt the bigger chains.

d) No debt. That's right, no debt on the sheet.

e) Founder CEO Ralph Rubio. I like a man who puts his name on the Nasdaq ticker. That takes guts.

CONS:

a) 158 restaurants - margins are razor thin (<2% operating margin) and falling over TTM. Comps are flat. That's not great but their new branding/look scheme is outperforming the corporate average by 18% and it shouldn't take too much capex to institute that in all the restaurants.

b) Earnings are barely break-even at this point; numbers such as margins, comps and earnings are pretty volatile. To their credit, management isn't cooking the books to make these look better. I think it's way too early in the history of this company to make any judgements on these early numbers.

c) Zack's criticizes them for expanding aggressively while the economy is slowing. I dunno about that - I can fill up here for $8 and the food's great. I think people who have to feed kids, pretty much have to feed kids. They'll probably do it here.

Right now the market cap is right above the $100m limit. That means that, for the purposes of CAPS, there will never be a better time to green-thumb this company; if the numbers change to suggest a better buying opportunity, CAPS won't let me have it. So I'm putting the green thumb on these fish tacos right now!

Abbynormal92243 (25.05) Submitted: 8/14/2007 3:16:28 AM : Start Price: $10.72 RUBO Score: -11.07

Rubio's is to Mexican food as In & Out Burger is to burger joints.
I think people will forget about the lobster debacle, and Rubios will grow into its britches.

okay, this is a hopeful pitch--they've got new leadership, and I'm hoping they'll lead Rubios to the profitable future such good food deserves.

rd80 (99.26) Submitted: 7/10/2007 7:22:00 PM : Start Price: $10.20 RUBO Score: -4.57

I would really like to be able to pick this at a lower price, but can't because if would fall below the $100 million market cap limit. I've previously picked this to underperform because I thought the stock had gotten ahead of itself, it's now pulled back and consolidated a bit.

Rubio's operates 160 fast-casual Mexican restaraunts, mostly located in So. California and the US Southwest. For what it's worth, given a choice between eating at Chipotle or Rubio's, my choice would be Rubio's.

The company has no debt and just under 60 cents a share in cash. Forward PE is 22.7, PEG of 1.98 - both a little on the high side. Enterprise Value to EBITDA is 8 based on trailing 12 months and price-to-book is about 2.5. With a little earnings growth, they could be a buyout candidate. However, I believe Ralph Rubio controls enough of the stock that it couldn't be sold unless he wanted to sell. Cash flow is plowed back into expanding the business by opening new stores. Rubio's has potential to become a regional-to-national story, but to date expansion has been focused on the Southwest.

For comparable metrics, Chipotle trades at a forward PE of 39, PEG of 1.95 and EV/EBITDA on ttm of 23.2 and p/b of 5.75. So, Chipotle is quite a bit pricier than Rubio's, but also has much stronger predicted growth.

Bottom line, this isn't one of my favorite outperforms, but I felt like I should get off the sidelines after getting the score leader charm back and thought the case for a green thumb was a little better at this price. Of course, if I'm wrong I won't be score leader any more since the next three high scores are red thumbs. Guess I could play defense, but what fun would that be.

I don't own any shares, but would consider buying it if the price pulled back into the mid-9's or if earnings growth and expansion outpace the stock price for awhile.