Nathans Famous, Inc. (NASDAQ: NATH)

Sector: Consumer Cyclical Industry: Restaurants CIK: 0000069733
Market Cap 379.35 Mn
P/B -64.26
P/E 16.60
P/S 2.45
ROIC (Qtr) 52.91
Div Yield % 5.39
Rev 1y % (Qtr) 11.14
Total Debt (Qtr) 53.87 Mn
Debt/Equity (Qtr) -9.13

About

Nathan's Famous, Inc., often recognized by its stock symbol NAT, operates in the foodservice industry. Its rich history dates back to 1916 when it first opened as a nickel hot dog stand on Coney Island. Today, Nathan's Famous is a leading branded licensor, wholesaler, and retailer of products marketed under its Nathan's Famous brand, including its popular Nathan's World Famous Beef Hot Dogs. Nathan's Famous generates revenue through various channels, including its licensing program, branded product program, and franchise operations. The company's...

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Price action

Investment thesis

Bull case

  • Healthy cash reserves of 32.17M provide 7.43x coverage of short-term debt 4.33M, demonstrating strong liquidity position and minimal refinancing risk.
  • Operating cash flow of 20.35M provides strong 17.73x coverage of stock compensation 1.15M, indicating sustainable incentive practices.
  • Robust free cash flow of 19.98M exceeds capital expenditure of 371000 by 53.86x, indicating strong organic growth funding capability.
  • Operating cash flow of 20.35M fully covers other non-current liabilities 1.50M by 13.61x, showing strong long-term stability.
  • Operating cash flow of 20.35M provides solid 1.15x coverage of current liabilities 17.73M, showing strong operational health.

Bear case

  • Operating cash flow of 20.35M barely covers its investment activities of (371000), with a coverage ratio of -54.86, indicating heavy reliance on external financing for growth which may not be sustainable in a tighter credit environment.
  • Operating cash flow of 20.35M provides thin coverage of dividend payments of (8.18M) with a -2.49 ratio, suggesting potential dividend sustainability issues if operational performance deteriorates.
  • High receivables of 21.61M relative to inventory of 945000 (22.87 ratio) suggests aggressive credit terms or collection difficulties, potentially masking revenue quality issues.
  • Free cash flow of 19.98M represents just -1.92x of debt issuance (10.40M), suggesting concerning reliance on leverage rather than internal cash generation for growth.
  • Tangible assets of 62.34M provide limited backing for working capital of 37.68M, which is 1.65x, suggesting increased operational risk in market downturns.

Peer comparison

Companies in the Restaurants
S.No. Ticker Company Market Cap P/E P/S Total Debt (Qtr)
1 MCD Mcdonalds Corp 222.05 Bn 26.39 8.45 55.82 Bn
2 SBUX Starbucks Corp 95.51 Bn 51.45 2.57 26.61 Bn
3 CMG Chipotle Mexican Grill Inc 50.94 Bn 33.15 4.32 4.98 Bn
4 YUM Yum Brands Inc 43.17 Bn 29.83 5.36 11.55 Bn
5 QSR Restaurant Brands International Inc. 22.43 Bn 24.33 2.42 15.64 Bn
6 DRI Darden Restaurants Inc 21.91 Bn 19.91 1.77 6.16 Bn
7 YUMC Yum China Holdings, Inc. 18.12 Bn 20.05 1.57 1.84 Bn
8 DPZ Dominos Pizza Inc 14.57 Bn 24.72 3.01 5.05 Bn

Industry comparisons

Current Valuation Value Ind Avg Percentile
EV to Assets EV to Assets 6.48 2.05
EV to Cash from Ops. EV/CFO 20.02 16.57
EV to Debt EV to Debt 7.56 4.75
EV to EBIT EV/EBIT 11.89 3.45
EV to EBITDA EV/EBITDA 11.86 9.76
EV to Free Cash Flow [EV/FCF] EV/FCF 20.39 29.06
EV to Market Cap EV to Market Cap 1.07 6.55
EV to Revenue EV/Rev 2.63 2.40
Price to Book Value [P/B] P/B -64.26 -1.40
Price to Earnings [P/E] P/E 16.60 13.35
Dividend Metrics Value Ind Avg Percentile
Dividend Coverage Ratio Div Coverage (Qtr) 2.79 -9.56
Dividend Payout Ratio % Div Payout % (Qtr) 35.80 18.72
Dividend per Basic Share Div per Share (Qtr) 2.00 0.84
FCF Dividend Payout Ratio % FCF Div Payout % (Qtr) 40.92 30.41
Interest Coverage Int. cover (Qtr) 11.04 -86.85
Growth Metrics Value Ind Avg Percentile
Capex Growth (1y) % Capex 1y % (Qtr) -35.40 -24.56
Cash and Equivalents Growth (1y) % Cash & Equiv 1y % (Qtr) 3.10 35.50
Dividend Growth (1y) % Div 1y % (Qtr) 0.00 -0.72
EBIAT Growth (1y) % EBIAT 1y % (Qtr) -1.26 -564.81
EBITDA Growth (1y) % EBITDA 1y % (Qtr) -5.45 25.78
EBIT Growth (1y) % EBIT 1y % (Qtr) -3.14 -507.68
EBT Growth (1y) % EBT 1y % (Qtr) 2.70 -41.98
EPS Growth (1y) % EPS 1y % (Qtr) 4.49 -126.51
FCF Growth (1y) % FCF 1y % (Qtr) -13.83 5,724.78
Gross Profit Growth (1y) % Gross Profit 1y % (Qtr) -5.45 23.70
Liquidity Ratios Value Ind Avg Percentile
Asset Utilization Ratio Asset Util Ratio (Qtr) 2.47 0.99
Cash Payout Ratio Cash Payout (Qtr) 0.39 0.07
Cash Ratio Cash Ratio (Qtr) 1.81 0.78
Current Ratio Curr Ratio (Qtr) 3.13 1.47
Debt to Equity Ratio Debt/Equity (Qtr) -9.13 0.05
Interest Cover Ratio Int Coverage (Qtr) 11.04 -86.85
Times Interest Earned Times Interest Earned (Qtr) 11.04 -86.85
Profitability Value Ind Avg Percentile
EBITDA Margin % EBITDA Margin % (Qtr) 22.70 7.71
EBIT Margin % EBIT Margin % (Qtr) 22.10 -2.27
EBT Margin % EBT Margin % (Qtr) 20.10 -1.97
Gross Margin % Gross Margin % (Qtr) 31.60 34.04
Net Profit Margin % Net Margin % (Qtr) 14.70 -3.69