Biglari Holdings, Inc. – Value Analysis (NYSE:BH) : July 31, 2017

Capitalcube gives Biglari Holdings, Inc. a score of 44.

Our analysis is based on comparing Biglari Holdings, Inc. with the following peers – DineEquity, Inc., Bob Evans Farms, Inc., Denny’s Corporation, Cracker Barrel Old Country Store, Inc., Ark Restaurants Corp., Texas Roadhouse, Inc., Buffalo Wild Wings, Inc., Ignite Restaurant Group, Inc. and Diversified Restaurant Holdings, Inc. (DIN-US, BOBE-US, DENN-US, CBRL-US, ARKR-US, TXRH-US, BWLD-US, IRGTQ-US and SAUC-US).

Investment Outlook

Biglari Holdings, Inc. has a fundamental score of 44 and has a relative valuation of UNDERVALUED.

Fundamental Score

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Company Overview

  • From a peer analysis angle, relative underperformance over the last year has improved more recently.
  • It trades at a lower Price/Book multiple (1.52) than its peer median (4.17).
  • The market expects BH-US‘s earnings to grow at about the same rate as its chosen peers and also does not seem to expect much improvement in its below peer median returns.
  • BH-US employs relatively high amounts of assets while generating relatively median profit margins.
  • Changes in annual earnings (relative to peers) are better than the change in its revenues (relative to peers), implying the company is focused more on earnings.
  • Over the last five years, BH-US‘s return on assets has eroded from above median to below median among its peers suggesting declining relative operating performance.
  • The company’s relatively high gross margin suggests some differentiation with pricing advantages versus peers.
  • BH-US‘s revenue growth in recent years and current P/E ratio are both around their respective peer medians suggesting that historical performance and long-term growth expectations for the company are largely in sync.
  • The company’s level of capital investment is relatively low and suggests it is milking the business.
  • BH-US‘s operating performance may not allow it to raise additional debt.

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Leverage & Liquidity

BH-US would seem to have a hard time raising additional debt.

  • With debt at 25.25% of its enterprise value compared to an overall benchmark of 25% (Note: The peer median is currently 20.69%), and relatively tight interest coverage level of 1.40x, BH-US would have a hard time raising much additional debt.
  • All 9 peers for the company have an outstanding debt balance.

BH-US has maintained its relatively low liquidity profile from the recent year-end.

  • BH-US‘s interest coverage is similar to its five-year average interest coverage of 1.49x.
  • Though its interest coverage has remained relatively stable at 1.40x compared to 2016, its peer median has decreased to 4.02x from 5.35x during this period.
  • Interest coverage rose 1.18 points relative to peers. It is also below the 2.50x coverage benchmark unlike the peer median.
  • BH-US‘s debt-EV has increased 0.55 percentage points from last year’s low but is still below its five-year average debt-EV of 36.28.
  • The increase in its debt-EV to 25.25% from 24.70% (in 2016) was also accompanied by an increase in its peer median during this period to 20.69% from 15.55%.
  • Relative to peers, debt-EV fell 4.59 percentage points. Unlike the peer median, it is also above the 25% leverage benchmark.

Access the detailed analysis for Biglari Holdings, Inc.

Key Liquidity Items

Company Debt/Enterprise Value (%) Current Ratio Interest Coverage (x) Cash Flow To Total Debt (%)
DineEquity, Inc. 63.24 1.34 3.43 8.42
Bob Evans Farms, Inc. 0.24 2.9 4.3 45.63
Denny’s Corporation 23.15 0.41 3.74 33.71
Cracker Barrel Old Country Store, Inc. 9.83 1.12 23.27 78.26
Ark Restaurants Corp. 13.93 0.55 16.82 79
Texas Roadhouse, Inc. 1.72 0.67 143.83 455.78
Buffalo Wild Wings, Inc. 18.22 0.57 13.14 54.17
Ignite Restaurant Group, Inc. 106.5 0.15 -0.39 1.71
Diversified Restaurant Holdings, Inc. 68.78 0.39 0.51 9.11
Biglari Holdings Inc. 25.25 0.98 1.4 19.67
Peer Median 20.69 0.62 4.02 39.67
Best In Class 0.24 2.9 143.83 455.78

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Company Profile

Biglari Holdings Inc. operates as a holding company owning subsidiaries those are engaged in a number of diverse business activities, including media, property and casualty insurance, and restaurants. The company was founded by Sardar Biglari in 2008 and is headquartered in San Antonio, TX.

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