Restaurant Sector Analysis
Miller Tabak provides primary coverage on a growing list of small-, mid-, and large-cap restaurant companies, including investment recommendations and actively updated earnings models for each company. We also comment on companies outside our primary coverage when company-specific events or relevant industry trends warrant.
Miller Tabak's restaurant research begins by relying on our macroeconomic perspective to gauge the overall health of the restaurant sector and the trends that influence it. We supplement this analysis with regular restaurant checks, which we use to gather information on menu pricing and traffic chains at individual companies. In addition, we consult suppliers and distributors on a regular basis to determine the effects of price changes and other factors on purchasing patterns. By providing these additional data points, we aim to help clients navigate the competitive landscape of the restaurant sector more effectively.
With the easy gains made possible by cost reductions in 2009 and more stable same-restaurant sales trends in 2010 now in the past, stock selection in the restaurant sector has become increasingly important in 2011, particularly in a period of rising commodity prices. Our investment focus is on companies that meet our five-screen criteria of (1) positive same-restaurant sales, or those that are leaning in that direction; (2) market share gains; (3) ability to raise menu prices without losing traffic; (4) improved operating efficiencies, which lends itself to increased earnings power; and (5) balance sheet and cash flow improvements. If companies meet these criteria, Miller Tabak looks for valuation mispricing opportunities.