225Research

225Research strives to find strong investment opportunities and aims to provide in-depth and insightful analysis of these opportunities for our readers.

February 2023
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The information found on “The Stock Boys” is for informational purposes only. It should not be taken or used as financial advice. The Stock Boys makes no guarantee or promises as to any results that may be obtained from using our content. No one should make any investment decision based solely on the information found on this site and without the help of a financial adviser or conduction of their own research and due diligence. The Stock Boys disclaim any liability for any results incurred by the use of our information, content or articles. Your use of the information of materials linked from the site is at your own risk.

February 2023
M T W T F S S
 12345
6789101112
13141516171819
20212223242526
2728  

Disclaimer

The information found on “The Stock Boys” is for informational purposes only. It should not be taken or used as financial advice. The Stock Boys makes no guarantee or promises as to any results that may be obtained from using our content. No one should make any investment decision based solely on the information found on this site and without the help of a financial adviser or conduction of their own research and due diligence. The Stock Boys disclaim any liability for any results incurred by the use of our information, content or articles. Your use of the information of materials linked from the site is at your own risk.

Restaurant
Our Picks

Screen of the week – Restaurants

Weekly Screens – Explained

We spend a lot of time searching through names and screening through various companies, but not always are we able to pursue every interesting business that comes up. In this new segment we are sharing the most interesting names that we have found, but haven’t be able to pursue in depth.

Restaurants

Although the restaurant sector as a whole tends to have low margins and is at the whim of cost inflation and consumer spending habits, some names stand out as value. We also believe that long term restaurant spending will remain solid and continue to grow, hence our interest in restuarants. 

Jack in the box

What stands out is the highly franchised model with a management team that returns large amounts of cash to shareholders. The company continues to buy back stock at a high rate with its 8% FCF yield, and GDP+ y/y SS comps continue to chug along.  94% franchised rate continues to offer predictable FCF and very limited Capex, meaning the share buyback and dividend increases should continue. Over the last 5 years, shares outstanding have shrunk over 40% and should continue to occur under this management team. 

Del Taco

Del taco wins on price in its menu and its valuation. The company continues to open new stores and re-franchise non-core markets and continues to trade very cheap. This one has “Private Equity target” written all over it and has plenty of room to continue to grow units. Another aspect we like is how efficient they operate. These guys can make money selling food under a dollar meaning they should thrive no matter the economic climate. 

Recipe Unlimited

RECP owns some of the largest and most well-known dining brands in Canada including Harvey’s, Swiss Chalet, East Side Mario’s, and Montana’s. The company is very cheap with the negative downdrafts restaurants have experienced with negative y/y comps, yet trades at a compelling 7x cash flow multiple, with high FCF conversion. As well, RECP continues to buy back shares and make acquisitions growing there brand holdings, and growing per share cashflow. Although fairly low amount of there restaurants being franchised vs the other 2, the leading brands and market positions in Canada continue to act as a strong advantage. 

A&W Royalty fund

Although A&W only has royalties in Canada, the brand has successfully developed as an innovator that resonates with its customers. investors are looking at an ~5% dividend with a company that has been a rockstar at growing Same-store sales above GDP, with there ability to adapt to what consumers want (1st to implement Beyond meat in Canada, pivoted to a more quality-focused approach, sustainable beef). on top of Same-store sales growth, the company continues to see new openings under the A&W brand with net 37 stores additions last fiscal year which will continue to grow its royalty stream.