- Mixed results for restaurant stocks in September as valuations fluctuated by segment. Casual Dining, Coffee, Family Dining and Sandwich stocks all had multiple expansion during the month, while Fast Casual, Fine Dining and Pizza stocks had multiple contraction.
- Takovers (BAGL,THI) have driven the multiples in the Coffee segment, which has now overtaken Fast Casual as the most expensive segment on an EV-to-EBITDA basis, with BAGL, DNKN, KKD, SBUX and THI all trading above their average valuations since 2010.
- Casual Dining, Fast Casual and Fine Dining stocks are currently trading at the most compelling valuations of the bunch relative to their more recent historical means.
- Casual Dining is trading at one of the lowest multiples out of all of the segments, which we believe means two things: 1) it is likely to attract activist investors and 2) it will pressure management teams to pursue value enhancing initiatives (BLMN).
- Family Dining is trading near the high end of its range due to the recent activist activity surrounding BOBE.