Cracker Barrel Old Country Store Inc (CBRL, Financial) has experienced a notable decline in its stock price, with a daily loss of 10.62% and a 3-month loss of 17.07%. Despite these setbacks, the company boasts an Earnings Per Share (EPS) of $4.45. Investors may ponder whether the stock is significantly undervalued. This article will delve into a valuation analysis to determine the true worth of Cracker Barrel Old Country Store Inc (CBRL) shares. Read on to uncover the insights from our financial exploration.
Company Introduction
Cracker Barrel Old Country Store operates a chain of full-service restaurants across the United States, known for its home-style country food and unique combination of dining and retail within its stores. With a market cap of $1.40 billion and annual sales of $3.40 billion, the company has established a strong presence in the restaurant industry. Despite its current stock price of $67.13, the GF Value estimates its fair value at a much higher $144.44, suggesting that the stock may be significantly undervalued. This discrepancy sets the stage for a deeper examination of Cracker Barrel Old Country Store's intrinsic value.
Summarize GF Value
The GF Value is a proprietary measure that determines the intrinsic value of a stock, based on historical trading multiples, a GuruFocus adjustment factor, and future business performance estimates. When the stock price significantly deviates from the GF Value Line, it indicates potential overvaluation or undervaluation. Currently, Cracker Barrel Old Country Store (CBRL, Financial) is deemed significantly undervalued, with the stock trading at $67.13, well below the GF Value Line. This suggests that the long-term return on Cracker Barrel Old Country Store's stock could be much higher than its business growth, presenting an attractive opportunity for value investors.
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Financial Strength
Investors must consider a company's financial strength to avoid the high risk of permanent capital loss. Key indicators like the cash-to-debt ratio and interest coverage can provide insights into this aspect. Cracker Barrel Old Country Store's cash-to-debt ratio is 0.02, which is lower than 94.13% of its peers in the Restaurants industry, reflecting a fair financial strength rating of 5 out of 10. Understanding the company's financial health is crucial before making investment decisions.
Profitability and Growth
Investing in profitable companies is generally less risky, especially when these companies have shown consistent profitability over time. Cracker Barrel Old Country Store has been profitable 9 out of the past 10 years, with a fair profitability rank. However, its operating margin of 3.91% is lower than half of its industry counterparts. Nevertheless, the company's growth has been impressive, with a 3-year average annual revenue growth rate of 13.5%, ranking better than 85.89% of the industry. The 3-year average EBITDA growth rate is 4.8%, which is also a solid performance indicator.
ROIC vs. WACC
An important profitability metric is the comparison of a company's return on invested capital (ROIC) to its weighted average cost of capital (WACC). Cracker Barrel Old Country Store's ROIC stands at 5.76, which is currently below its WACC of 7.58, indicating that the company may not be creating value for its shareholders at this time. This comparison is a vital part of the investment analysis process.
Conclusion
In conclusion, Cracker Barrel Old Country Store (CBRL, Financial) appears to be significantly undervalued based on current market prices. The company's financial condition and profitability are considered fair, and it has demonstrated commendable growth compared to its industry peers. For a more detailed look at Cracker Barrel Old Country Store's financials, investors can explore its 30-Year Financials here.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
