Biglari Holdings, Inc. – Value Analysis (NYSE:BH) : October 2, 2017

Capitalcube gives Biglari Holdings, Inc. a score of 47.

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 47 and has a relative valuation of UNDERVALUED.

Fundamental Score

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Company Overview

  • Compared to peers, relative underperformance over the last year is in contrast with the more recent outperformance.
  • It trades at a lower Price/Book multiple (1.29) than its peer median (4.31).
  • The market expects faster earnings growth from BH-US than from its peers and also a turnaround in its current ROE.
  • BH-US‘s relatively low net margins and poor asset turns suggest a problematic operating strategy.
  • 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 median gross margin and relatively low pre-tax margin suggest high operating costs versus peers.
  • While BH-US‘s revenues growth has been around the peer median in recent years, the market seems to see faster growth ahead and gives its shares a higher than peer median P/E ratio.
  • The company’s level of capital investment seems appropriate to support the company’s growth.
  • 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 26.73% of its enterprise value compared to an overall benchmark of 25% (Note: The peer median is currently 21.54%), and relatively tight interest coverage level of 1.01x, 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 its lowest relative to the last five years and compares to a high of 2.40x in 2012.
  • Though its interest coverage decreased to 1.01x from 1.54x (in 2016), its peer median remained relatively stable during this period at 5.53x.
  • Interest coverage fell 0.72 points relative to peers. It is also below the 2.50x coverage benchmark unlike the peer median.
  • BH-US‘s debt-EV has increased 2.03 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 26.73% from 24.70% (in 2016) was also accompanied by an increase in its peer median during this period to 21.54% from 15.60%.
  • Relative to peers, debt-EV fell 3.91 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. 68.4 1.37 3.32 7.9
Bob Evans Farms, Inc. 6.34 1.11 5.91 135.61
Denny’s Corporation 24.86 0.34 5.16 32.64
Cracker Barrel Old Country Store, Inc. 10.05 0.95 30.98 76.17
Ark Restaurants Corp. 16.62 0.37 9.23 55.64
Texas Roadhouse, Inc. 1.47 0.7 139.64 476.79
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. 63.43 0.32 0.6 8.6
Biglari Holdings Inc. 26.73 0.94 1.01 16.28
Peer Median 21.54 0.64 5.53 43.4
Best In Class 1.47 1.37 139.64 476.79

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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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