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Author: StrikeItLucky Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 401  
Subject: My take on DANB Date: 5/4/1999 3:20 PM
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All,

I have been taking a little look at DANB recently:

http://boards.fool.com/registered/Message.asp?id=1030002000487000&sort=postdate

The conclusion I am coming to is that it doesn't seem like a great investment. Any comments you guys would care to provide me with would be much appreciated.

Yrs,
StrikeItLucky
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Author: WTHUNTER2 Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 138 of 401
Subject: Re: My take on DANB Date: 5/5/1999 6:30 PM
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Take a look at the last few days and tell me there are no reasons to get into this stock. When D&B comes into any town they attract a very LARGE and LOYAL following, it becomes the place to take guests and visitors to in your town. The lots are always FULL of cars and it is non-stopped. I don't need charts and #'s to see the future of this company. The earnings will be there and the management will continue their prudent expansion. The day traders have hurt us slightly but I believe they (and their effect) are slowly leaving this stock alone. This will allow the price to take hold at increasingly higher levels.

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Author: StrikeItLucky Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 139 of 401
Subject: Re: My take on DANB Date: 5/5/1999 6:41 PM
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WTHUNTER,

Here is my current thinking. Every restaurant takes $10million to open. Each restaurant makes about $750,000 in profit a year.

I don't care how popular they are, based on those numbers this business cannot grow earnings fast enough to justify its current P/E (even though it is low by today's market's standards) without taking on lots of debt. Since D&B are planning to open 21 restaurants over the next 3 years at a cost of approx $200million and only approximately $30million can come from retained earnings, they will have a debt to equite ratio at the end of three years of about 1:1 and they will still be taking on debt faster than they are growing equity.

As long as they continue to generate only 7.5% on invested capital, they cannot grow the business faster than that without increasing leverage. But the current P/E is only justifiable with growth rates vastly exceeding 7.5%.

I guess what I'm saying is that it just costs too much to open a complex compared to trh profits they are making from them. That just means that opening more complexes makes the business a worse capital sink than it already was.

Yrs,
StrikeItLucky

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Author: WTHUNTER2 Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 140 of 401
Subject: Re: My take on DANB Date: 5/5/1999 7:54 PM
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StrikeItLucky

Thanks for making me go back and research the #'s to justify my purchase. Here is how I see it.

You have to compare D&B to their industry to make sense of the #'s and where they are going. In every case D&B is leading their industry.

Income per Employee... D&B = $4000.00
Industry = $2000.00

Revenue per Employee.. D&B = $59000.00
Industry = $41000.00

1 year Sales Growth.. D&B = 42%
Industry = 14%

1 year Income Growth.. D&B = 52%
Industry = -48%

Net Profit Margin.. D&B = 7.5%
Industry = 4%

Return on Capital.. D&B = 8%
Industry = 6.5%

Debt/Equity Ratio.. D&B = .21
Industry = .79

The point is D&B is leading their industry. Even at the current P/E ratio D&B would sell around $28/$29 at their current earnings pace by 2000, and around $36/$39 by the end of 2001. Now if we add the industry's average P/E of 42.10 to these growth rates, we could see D&B at $55 and $72 during the same periods. D&B's P/E will move more toward the industry's average if the keep leading the others. Your numbers make sense only if you fail to compare them with the current industry's standards. The standards drive the market and D&B leads the industry.

Thats My Take

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Author: StrikeItLucky Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 141 of 401
Subject: Re: My take on DANB Date: 5/5/1999 7:58 PM
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I agree - but I'm coming to the conclusion that it's just a terrible industry. The only way to make it pay is to subsist off debt, which is precisely what D&B seem to be planning...

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Author: WTHUNTER2 Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 142 of 401
Subject: Re: My take on DANB Date: 5/5/1999 8:05 PM
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I don't type and that little bit took me 30 minutes, and you come back with a 2 sentence reply!! I feel cheated! Can I at least have the comfort of knowing you will seriously watch the #'s and possibly join the faithful?

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Author: StrikeItLucky Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 143 of 401
Subject: Re: My take on DANB Date: 5/5/1999 8:21 PM
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WT,

I'm sorry - but on the other hand I did come up with the first post didn't I ? :-)

I will certainly watch the numbers and I'm going to take up CM's suggestion of looking at same store figures if I can find them before I totally discard my DANB idea.

Yrs,
StrikeItLucky

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Author: Caederus Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 145 of 401
Subject: Re: My take on DANB Date: 5/6/1999 8:03 AM
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One thing to keep in mind is that D&B has started opening what they are calling a D&BII. The D&BII is a smaller version of the regular establishment, but cheaper and quicker to build. The first of the D&BII stores have already opened, and are doing sales numbers in the range of some of the older establishments. I believe that the Columbus OH location is a D&BII. I cann't recall the exact numbers right now, but I'll look.

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Author: Walden Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 146 of 401
Subject: Re: My take on DANB Date: 5/7/1999 6:39 AM
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Thanks for the analytical post.

What industry baseline data are you using for your comparisons?

Do you like any other restaurant stocks? I sold OSSI to get into DANB.

This is a tough industry in which to make a buck. I know from bitter
experience.

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