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Famous Dave’s of America – Time to hit the Sauce?

October 04, 2009 | About:
Famous Dave's of America, Inc. operates restaurants. As of June 3, 2009, the Company had 176 Famous Dave’s restaurants in 38 states, including Company-owned restaurants and franchise-operated restaurants. The Company’s restaurants feature hickory-smoked off-the-grill entree favorites. Typical designs include a designated bar, a signature exterior smokestack, a separate entrance for its category-leading take-out business and a patio (where space permits).

Famous Dave’s [NDQ:DAVE] Oct. 3, 2009 close: $5.40

52-week range: $2.00 (Mar. 5, 2009) - $7.25 (Jul. 30, 2009)

Dave’s routinely enters BBQ competitions and has garnered over 300 awards for everything from the best ribs to the best BBQ sauce to the best BBQ cookbook. 2008 saw the first drop in EPS since 2003 due to recessionary conditions as well as a $6.912 MM one-time charge for asset impairment, lease terminations, and unit closure expenses for stores deemed underperformers.

First half earnings rebounded strongly to $0.41 /share and consensus views now see 2009 and 2010 earnings coming in at $0.63 and $0.73 respectively. At last week’s close of $5.40 that makes DAVE’s multiple about 8.6x this year’s and 7.4x next year’s expectations. Compare those with the historical P/Es of the past in the chart below.

Here are the company’s reported per share numbers since 2004…

Year ........ Sales ........ C/F .......... EPS ........ B/V ........ Avg. P/E .... 52-wk. range

2004 ....... 8.76 ........ 0.71 ......... 0.29 ....... 3.82 ......... 26.6x ....... 4.65 – 13.61

2005 ....... 9.66 ........ 0.83 ......... 0.40 ....... 3.51 ......... 29.4x ....... 9.39 – 15.00

2006 .......11.51 ....... 1.00 ......... 0.46 ....... 3.54 ......... 26.5x .......11.09 – 17.24

2007 ...... 13.10 ....... 1.15 ......... 0.59 ....... 3.16 ......... 30.4x .......11.03 – 23.37

2008 .......15.46 ....... 1.15 ......... 0.04* ..... 2.88 .......... 9.08 ........ 2.39 – 14.36

* 2008 EPS excluding the one-time charges = $0.52

It doesn’t seem a stretch to think Famous Dave’s can snap back to at least 10 – 12 times earnings over the next year or two. That would lead to a target price range of $7.30 - $8.76 by year-end 2010. The low-end goal would be 35.2% above the current quote and the higher target would represent more than a 62% gain.

Are those achievable? Why not? Just a glance at the table above shows actual trades between $9.39 and $23.00 during each year 2004 right through 2008. DAVE traded as high as $7.25 just a few months ago.

The company has been gradually retiring shares since 2003. Common shares outstanding have dropped from around 12.16 million to 9.19 million since year-end 2003.

There are options available on this stock but they trade very thinly and with wide bid-ask spreads. Use limit orders if you choose to play with DAVE’s puts or calls.

The last 10 insider transactions were all buys (by the same Director) and all shares were purchased at higher than last week's closing price.


Disclosure: Author is long DAVE shares and short DAVE options.

About the author:

Dr. Paul Price
http://www.RealMoneyPro.com
http://www.TalkMarkets.com

Visit Dr. Paul Price's Website


Rating: 3.5/5 (11 votes)

Comments

Dr. Paul Price
Dr. Paul Price premium member - 4 years ago


DAVE closed at $6.20 today. It's up 14.8% since my write-up from last weekend.
Dr. Paul Price
Dr. Paul Price premium member - 4 years ago
Famous Dave’s is due to report earnings today.

The shares have quietly risen from our recommended price of $5.40 to yesterday’s close of $7.15 - a gain of 32.4% since the

October 4, 2009 write-up.
Dr. Paul Price
Dr. Paul Price premium member - 4 years ago




Famous Dave’s Reports Fourth Quarter Results of $0.08 Per Share; Full Year Results of $0.62 Per Share

Famous Dave’s of America, Inc. DAVE today announced revenue of $32.6 million and net income of $774,000, or $0.08 per diluted share, for its fiscal fourth quarter ended January 3, 2010. These results compare to revenue of $32.8 million and a net loss of $2.0 million, or ($0.22) per diluted share for the comparable period in the prior year. For the full year ended January 3, 2010, the company reported net income of $5.7 million, or $0.62 per diluted share, on total revenue of approximately $136.0 million, as compared with net income of $389,000, or $0.04 per diluted share, on total revenue of approximately $140.4 million for fiscal 2008.

Fiscal 2009’s fourth quarter and full year results include an approximate $0.05 per diluted share impact resulting from a 53rd fiscal week, compared to 52 weeks in the prior fiscal year. The fiscal 2009 full year results also reflect approximately $0.05 of net charges for asset impairments, lease terminations, other closing costs, and early debt retirement. Fiscal 2008’s fourth quarter and full year results include an approximate $0.23 and $0.49 per diluted share, respectively, in net charges for asset impairments, lease terminations, and other closing costs.

“We were pleased with the response to our targeted promotional efforts during the fourth quarter, which helped boost sales and traffic for dine-in, to-go and catering,” said Christopher O’Donnell, president and chief executive of Famous Dave’s. “Additionally, our operations team did a ‘famous’ job of executing and maintaining a high level of guest satisfaction during the quarter, and despite the challenging sales environment of 2009, the company delivered solid financial results.”

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