Fogo de Chão, Inc. :FOGO-US: Earnings Analysis: 2016 By the Numbers : March 20, 2017

Fogo de Chão, Inc. reports financial results for the year ended December 31, 2016.

We analyze the earnings along side the following peers of Fogo de Chão, Inc. – Carrols Restaurant Group, Inc., Bojangles’, Inc. and Texas Roadhouse, Inc. (TAST-US, BOJA-US and TXRH-US) that have also reported for this period.


  • Gross margins narrowed from 26.77% to 24.30% compared to the same period last year, operating (EBITDA) margins now 18.90% from 17.93%.
  • Year-on-year change in operating cash flow of 50.14% is about the same as the change in earnings, likely no significant movement in accruals or reserves.
  • Earnings decline largely a result of non-operational activity, pretax margins improved from 5.09% to 12.56%.

The table below shows the preliminary results and recent trends for key metrics such as revenues and net income growth:

2016 2015 2014 2013 2012
Relevant Numbers (Annual)
Revenues 288.3 271.63 262.28 219.24 93.84
Revenue Growth (YOY) N/A N/A N/A N/A N/A
Earnings 24.44 27.87 17.56 -0.94 -9.03
Earnings Growth (YOY) -12.3 58.73 1973.53 89.63 N/A
Net Margin 8.48 10.26 6.69 -0.43 -9.62
EPS 0.85 1.06 0.65 -1.06 -10.21
Return on Equity 8.96 13.66 11.48 -0.62 N/A
Return on Assets 4.84 5.78 3.66 -0.19 N/A

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Earnings Growth Analysis

The company’s year-on-year earnings decline was driven by the drop in gross margins from 26.77% to 24.30%. This drop in earnings would have been worse were in not for operational cost control activities, which helped the operating margins (EBITDA margins) improve from 17.93% to 18.90%. For comparison purposes, gross margins were 26.77% and EBITDA margins were 17.93% in the previous period.

Gross Margin Versus EBITDA Margin

Quadrant label definitions. Hover to know more

Differentiated; Low Cost, Commodity; Low Cost, Commodity; High Cost, Differentiated; High Cost

Gross Margin Trend

Companies sometimes sacrifice improvements in revenues and margins in order to extend friendlier terms to customers and vendors. Capital Cube probes for such activity by comparing the changes in gross margins with any changes in working capital. If the gross margins improved without a worsening of working capital, it is possible that the company’s performance is a result of truly delivering in the marketplace and not simply an accounting prop-up using the balance sheet.

Gross Margin History
Working Capital Days History

FOGO-US‘s decline in gross margins has not produced any significant offsetting improvement in its working capital . This leads Capital Cube to conclude that the decline in gross margins are likely from operating issues and not trade-offs with the balance sheet. Working capital days are currently 18.43 days, compared to last year’s level of 6.95 days.

Gross Margin Versus Working Capital Days

Quadrant label definitions. Hover to know more

Customer Financed, Cash Starved, Supplier Financed, Cash Rich

Cash Versus Earnings – Sustainable Performance?

It is important to examine a company�s cash versus earnings numbers to gauge whether its performance is sustainable.

FOGO-US‘s change in operating cash flow of 50.14% compared to the same period last year is about the same as its change in earnings this period. Additionally, this change in operating cash flow is about average among its peer group. This suggests that the company did not use accruals or reserves to manage earnings this period, and that, all else being equal, the earnings number is sustainable.

Operating Cash Flow Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Cash Flow based Earnings, Likely Non-cash Earnings, Low Cash Flow Base, Likely Undeclared Earnings


The company’s earnings decline is largely a result of non-operational activity. As a matter of fact, the company showed increases in operating (EBIT) and pretax margins. EBIT margins improved from 13.34% to 13.44% and pretax margins widened from 5.09% to 12.56%.

EBIT Margin Versus PreTax Margin

Quadrant label definitions. Hover to know more

Operation driven Earnings, One-time Favorables, Low Earnings Base, One-time Unfavorables
EBIT Margin History
PreTax Margin History

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Company Profile

Fogo de Chão, Inc. provides fire-roasting meats by utilizing the Southern Brazilian cooking technique of churrasco. It offers a wide variety of Brazilian-inspired side dishes, fresh-cut vegetables, seasonal salads, aged cheeses and cured meats. Its dining experience is based on the centuries-old gaucho tradition known as churrasco, the gaucho way of roasting meats over open pits of fire. The company was founded in 1997 and is headquartered in Dallas, TX.

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