A town's first experience with "upscale" casual dining usually occurs when Applebee's Neighborhood Grill and Bar arrives because it usually the first casual dining restaurant to arrive. In most of those small towns that bond that develops between the Applebee's restaurant and the local population is a pretty strong bond that often lasts for years, despite other casual dining restaurants eventually moving into town.
IHOP has cornered the market for breakfast casual dining. It's closest competitor is the Waffle House and the experience is totally different and less satisfying. Fortunately the two brands that make up DineEquity are complementary and together they target the entire casual dining population.
DineEquity, Inc. (DIN), together with its subsidiaries, owns, franchises, and operates full-service restaurant chains in the United States and internationally. It owns and operates two restaurant concepts: Applebee's Neighborhood Grill and Bar in the bar and grill segment of the casual dining category and the International House of Pancakes (IHOP) in the family dining category of the restaurant industry.
The Applebee's Neighborhood Grill and Bars offer food, non-alcoholic and alcoholic beverage items and table service. The IHOP restaurants provide full table service, and food and beverage offerings. As of March 17, 2014, DinEquity operated 3,600 restaurants in 19 countries under the company's brands. The company was formerly known as IHOP Corp. and changed its name to DineEquity, Inc. in June 2008 with the acquisition of Applebee's. DineEquity, Inc. was founded in 1958 and is headquartered in Glendale, California. (Daily Chart) (Weekly Chart)
27 August 2014
1yr Target $93.50
1yr Cap Gain 12.11%
1yr Tot Return 15.71%
Market Cap $1.66 Bil
Payout Ratio 77.92%
EPS (ttm) $3.85
EPS next yr $5.47
Applebee’s® competes in the grill & bar segment of the casual dining category of the restaurant industry. In October 2012, the company completed its refranchising initiative successfully transitioning to a system that's 99% franchised. Applebee’s Neighborhood Grill & Bar restaurants are known for their fun and family-friendly neighborhood atmosphere and signature grill & bar menu items. (website)
IHOP competes in the family dining area of the restaurant industry. Today 99% of all IHOP restaurants franchised. For 50 years, IHOP family restaurants have served their world famous pancakes and a wide variety of breakfast, lunch and dinner items that are loved by people of all ages. IHOP offers its guests an affordable, everyday dining experience with warm and friendly service. (website)
Prior to 2007, DineEquity was composed of only the IHOP chain of company owned and franchised IHOP restaurants. During that period revenues and earnings were erratic but generally moving upward (see below). In 2007 DineEquity acquired the Applebee's Neighborhood Grill and Bar chain of restaurants and saw their revenues soar and their earnings decline. In 2007 the company also made the decision to transition from a combined company owned and franchised organization to a primarily franchised organization.
The transition continued for the next five years and in October 2012 DineEquity announced that 99% of their restaurants, both IHOP and Applebee's, had completed the transition and were franchised restaurants. The year 2013 became the first year of this "new" company.
Depending upon an investor's faith in the brokerage house's analyst's opinions, it appears that going forward DineEquity is about to show some excellent increases in revenues and earnings. If the dividend paid and the payout ratio experienced in 2013 is any indication of future dividends, an investor in this company is likely to be greatly rewarded in the very near future.
Revenue Growth Rate
3 year = -21.43%
5 year = -16.84%
10 year = 4.69%
Earnings Growth Rate
3 year = N/A
5 year = N/A
10 year = 8.08%
Dividend Growth Rate
3 year = N/A
5 year = N/A
10 year = N/A
- McDonald's Corporation (MCD)
- Yum Brands, Inc. (YUM)
- Burger King Worldwide, Inc (BKW)
- Darden Restaurants, Inc. (DRI)
- Dunkin' Brands Group, Inc. (DNKN)
- Domino's Pizza, Inc. (DPZ)
- Brinker International, Inc. (EAT)
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- Texas Roadhouse, Inc. (TXRH)
- DineEquity, Inc.
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Looking at the fundamentals I think their transition is working and if estimates are correct (a big if), there could be a really good future here for this stock. Finally I expect the economy to improve going forward so I see the customer base for casual dining expanding.
Obviously if an investor is looking for a company with more concrete fundamentals and a better technical chart, he should look closely at Brinker International, but I think DineEquity could very quickly become very similar to Brinker.
I would love to buy this stock at a P/E ratio of 20 or less which would put the stock at approximately $77.00 but the current dividend yield of 3.60 may keep this from happening. On the other hand, a beta of 2.07 may be just high enough to cause such a pullback to occur. It's the kind of volatility that makes investing so exciting. My intent is to put a buy order in for $80.00 per share and then add to the position on pullbacks below that amount. Wish me luck.
The Live Interactive Chart
"The Restaurant Industry", published 24 July 2014
"Cracker Barrel Old Country Store", published 13 August 2014
"McDonald's Corp", published 16 August 2014
"Brinker International", published 25 August 2014