Buffalo Wild Wings, Inc. – Value Analysis (NASDAQ:BWLD) : September 22, 2017

Capitalcube gives Buffalo Wild Wings, Inc. a score of 91.

Our analysis is based on comparing Buffalo Wild Wings, Inc. with the following peers – Brinker International, Inc., BJ’s Restaurants, Inc., Bloomin’ Brands, Inc., Del Frisco’s Restaurant Group, Inc., DineEquity, Inc., Denny’s Corporation, Red Robin Gourmet Burgers, Inc., Ark Restaurants Corp., Flanigan’s Enterprises, Inc. and Ignite Restaurant Group, Inc. (EAT-US, BJRI-US, BLMN-US, DFRG-US, DIN-US, DENN-US, RRGB-US, ARKR-US, BDL-US and IRGTQ-US).

Investment Outlook

Buffalo Wild Wings, Inc. has a fundamental score of 91 and has a relative valuation of NEUTRAL.

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 currently trades at a Price/Book ratio of (6.92).
  • BWLD-US outperforms its peers with a relatively high operating performance and the market also expects faster growth relative to its peers
  • BWLD-US‘s median net profit margins and relatively high asset efficiency give it some operating leverage.
  • The company’s year-on-year change in revenues and earnings are better than the median among its peer group.
  • BWLD-US‘s return on assets currently and over the past five years suggest that its relatively high operating returns are sustainable.
  • The company’s margins are around the peer medians and do not suggest any benefit from a pricing or an operating cost advantage versus peers.
  • Compared with the peers chosen, BWLD-US has had faster revenue growth in prior years and a current P/E ratio that suggests faster growth in the future suggesting superior growth expectations.
  • The company’s level of capital investment seems appropriate to support the company’s growth.
  • BWLD-US has the financial and operating capacity to borrow quickly.

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Leverage & Liquidity

BWLD-US has the financial and operating capacity to borrow quickly.

  • With debt at a relatively low 18.22% of its enterprise value compared to an overall benchmark of 25% (Note: The peer median is currently 24.86%), and a well-cushioned interest coverage level of 13.14x, BWLD-US can probably borrow quickly. We classify the company as Quick & Able in terms of its capacity to raise additional debt.
  • All 10 peers for the company have an outstanding debt balance.

BWLD-US has maintained its Quick & Able profile from the recent year-end.

  • BWLD-US‘s interest coverage is its lowest relative to the last five years and compares to a high of 999x in 2014.
  • The decrease in its interest coverage to 13.14x from 34.89x (in 2016) was also accompanied by a decrease in its peer median during this period to 5.78x from 6.71x.
  • Interest coverage fell 20.82 points relative to peers.
  • BWLD-US‘s debt-EV is its highest relative to the last five years and compares to a low of 0% in 2014.
  • The increase in its debt-EV to 18.22% from 7.24% (in 2016) was also accompanied by an increase in its peer median during this period to 24.86% from 21.15%.
  • Relative to peers, debt-EV rose 7.28 percentage points.

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Key Liquidity Items

Company Debt/Enterprise Value (%) Current Ratio Interest Coverage (x) Cash Flow To Total Debt (%)
Brinker International, Inc. 41.97 0.35 5.63 25.84
BJ’s Restaurants, Inc. 18.15 0.55 17.53 67.77
Bloomin’ Brands, Inc. 37.54 0.35 5.78 31.19
Del Frisco’s Restaurant Group, Inc. 5.98 0.68 300.06 165.83
DineEquity, Inc. 68.4 1.37 3.32 7.9
Denny’s Corporation 24.86 0.34 5.16 32.64
Red Robin Gourmet Burgers, Inc. 26.35 0.55 4.3 40.04
Ark Restaurants Corp. 16.62 0.37 9.23 55.64
Flanigan’s Enterprises, Inc. 19.57 1.42 10.73 56.61
Ignite Restaurant Group, Inc. 106.5 0.15 -0.39 1.71
Buffalo Wild Wings, Inc. 18.22 0.57 13.14 54.17
Peer Median 24.86 0.55 5.78 40.04
Best In Class 5.98 1.42 300.06 165.83

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Company Profile

Buffalo Wild Wings, Inc. owns, operates and franchises restaurants. The company’s restaurants feature a variety of menu items, including its Buffalo, New York-style chicken wings spun in one of its signature sauces from sweet to screamin’ hot, Sweet BBQ, Teriyaki, Mild, Parmesan Garlic, Medium, Honey BBQ, Spicy Garlic, Jammin’ Jalapeno, Asian Zing, Caribbean Jerk, Thai Curry, Hot BBQ, Hot, Mango Habanero, Wild and Blazin, signature seasonings, including Buffalo, Desert Heat, Chipotle BBQ, and Salt and Vinegar, a wide variety of food items, including Sharable appetizers, Wild Flatbreads, specialty hamburgers and sandwiches, wraps, Buffalito soft tacos, and salads, and a full bar, which offers an extensive selection of domestic, imported, and craft beers on tap, as well as bottled beers, wine and liquor. It also provides an Under Menu option for kids. The company was founded by Jim Disbrow and Scott Lowery in 1982 and is headquartered in Minneapolis, MN.

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