Brinker International, Inc (NYSE: EAT)

Sector: Consumer Cyclical Industry: Restaurants CIK: 0000703351
Market Cap 7.49 Bn
P/B 19.75
P/E 16.50
P/S 1.32
ROIC (Qtr) 22.37
Div Yield % 0.00
Rev 1y % (Qtr) 6.92
Total Debt (Qtr) 1.74 Bn
Debt/Equity (Qtr) 4.58

About

Brinker International, Inc., or more commonly known as EAT, is a prominent player in the casual dining industry, with its operations spanning across two well-established restaurant brands, Chili's Grill & Bar and Maggiano's Little Italy. The company's roots trace back to 1977, and it has continually adapted to the evolving preferences and trends of consumers over the years. Brinker International's primary revenue generation comes from its two main brands, Chili's and Maggiano's, along with its virtual brand, It's Just Wings. Chili's is a casual...

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Price action

Investment thesis

Bull case

  • Strong operating cash flow of 737.70M provides robust 0.42x coverage of total debt 1.74B, indicating excellent debt servicing capability and financial flexibility.
  • Operating cash flow of 737.70M provides strong 22.29x coverage of stock compensation 33.10M, indicating sustainable incentive practices.
  • Operating cash flow of 737.70M provides exceptional 16.28x coverage of interest expenses 45.30M, showing strong debt service capability.
  • Robust free cash flow of 457.10M exceeds capital expenditure of 280.60M by 1.63x, indicating strong organic growth funding capability.
  • Strong operating cash flow of 737.70M provides 3.15x coverage of SG&A expenses 234M, showing efficient operational cost management.

Bear case

  • Operating cash flow of 737.70M barely covers its investment activities of (279.20M), with a coverage ratio of -2.64, indicating heavy reliance on external financing for growth which may not be sustainable in a tighter credit environment.
  • High receivables of 105.80M relative to inventory of 36.40M (2.91 ratio) suggests aggressive credit terms or collection difficulties, potentially masking revenue quality issues.
  • Free cash flow of 457.10M represents just -2.08x of debt issuance (219.40M), suggesting concerning reliance on leverage rather than internal cash generation for growth.
  • High financing cash flow of (458.30M) relative to working capital of (428.80M), which is 1.07x suggests concerning dependence on external funding for operational needs.
  • Operating earnings of 587M show weak coverage of depreciation charges of 220.80M, with a 2.66 ratio indicating high capital intensity and potential reinvestment needs.

Peer comparison

Companies in the Restaurants
S.No. Ticker Company Market Cap P/E P/S Total Debt (Qtr)
1 MCD Mcdonalds Corp 269.29 Bn 53.02 11.14 55.82 Bn
2 SBUX Starbucks Corp 113.46 Bn 82.87 3.01 25.47 Bn
3 CMG Chipotle Mexican Grill Inc 52.60 Bn 34.25 4.41 5.08 Bn
4 YUM Yum Brands Inc 45.81 Bn 28.68 6.47 11.55 Bn
5 DRI Darden Restaurants Inc 28.08 Bn 75.62 5.18 6.41 Bn
6 DPZ Dominos Pizza Inc 23.46 Bn 237.88 14.39 -
7 QSR Restaurant Brands International Inc. 23.10 Bn 25.05 2.49 15.64 Bn
8 YUMC Yum China Holdings, Inc. 21.65 Bn 23.95 1.87 1.84 Bn

Industry comparisons

Current Valuation Value Ind Avg Percentile
EV to Assets EV to Assets 3.37 2.29
EV to Cash from Ops. EV/CFO 12.55 24.12
EV to Debt EV to Debt 5.33 5.80
EV to EBIT EV/EBIT 15.77 -9.51
EV to EBITDA EV/EBITDA 11.47 18.40
EV to Free Cash Flow [EV/FCF] EV/FCF 20.25 21.49
EV to Market Cap EV to Market Cap 1.24 2.46
EV to Revenue EV/Rev 1.63 3.21
Price to Book Value [P/B] P/B 19.75 -1.58
Price to Earnings [P/E] P/E 16.50 27.33
Dividend Metrics Value Ind Avg Percentile
Dividend Coverage Ratio Div Coverage (Qtr) 0.00 -9.76
Dividend Payout Ratio % Div Payout % (Qtr) 0.00 22.01
Dividend per Basic Share Div per Share (Qtr) 0.00 0.94
FCF Dividend Payout Ratio % FCF Div Payout % (Qtr) 0.00 33.46
Interest Coverage Int. cover (Qtr) 12.96 -92.74
Growth Metrics Value Ind Avg Percentile
Capex Growth (1y) % Capex 1y % (Qtr) -32.86 -25.92
Cash and Equivalents Growth (1y) % Cash & Equiv 1y % (Qtr) 1.35 33.72
Dividend Growth (1y) % Div 1y % (Qtr) 0.00 3.33
EBIAT Growth (1y) % EBIAT 1y % (Qtr) 55.43 -120.58
EBITDA Growth (1y) % EBITDA 1y % (Qtr) 50.22 -20.60
EBIT Growth (1y) % EBIT 1y % (Qtr) 64.80 11.80
EBT Growth (1y) % EBT 1y % (Qtr) 83.07 -45.23
EPS Growth (1y) % EPS 1y % (Qtr) 73.27 -136.44
FCF Growth (1y) % FCF 1y % (Qtr) 33.89 6,077.93
Gross Profit Growth (1y) % Gross Profit 1y % (Qtr) 33.77 24.40
Liquidity Ratios Value Ind Avg Percentile
Asset Utilization Ratio Asset Util Ratio (Qtr) 2.07 1.02
Cash Payout Ratio Cash Payout (Qtr) 0.00 0.09
Cash Ratio Cash Ratio (Qtr) 0.02 0.80
Current Ratio Curr Ratio (Qtr) 0.36 1.56
Debt to Equity Ratio Debt/Equity (Qtr) 4.58 0.61
Interest Cover Ratio Int Coverage (Qtr) 12.96 -92.74
Times Interest Earned Times Interest Earned (Qtr) 12.96 -92.74
Profitability Value Ind Avg Percentile
EBITDA Margin % EBITDA Margin % (Qtr) 14.20 8.18
EBIT Margin % EBIT Margin % (Qtr) 10.32 -2.07
EBT Margin % EBT Margin % (Qtr) 9.52 -0.92
Gross Margin % Gross Margin % (Qtr) 18.70 34.54
Net Profit Margin % Net Margin % (Qtr) 8.00 -2.79