Steak n Shake Lacks Sizzle

I find the floating "n" in Steak n Shake (NYSE: SNS  ) to be quite cute, but it seems even more folks are drawn to the company's milkshakes and steakburgers.

My opinions on the company's name aside, let's take a look at the earnings the company released last night. But before doing so, I recommend that investors check out the SEC's website for the company's 10-Q instead of the press release; the SEC filing has much more detailed information.

For the quarter, the company's same-store sales were up 2.8%, which by itself is unremarkable. Considering that same-store sales were up a strong 6.3% and 8% the prior two years, however, the slowing growth is a definite cause for concern. Continuing the theme from last quarter, the company was also able to turn in strong revenue growth of 13%, but higher costs and share dilution held back the diluted earnings per share, which came in at $0.28 versus last year's $0.27.

For investors looking for a bright side, management has reiterated its guidance for the final quarter of the year, which would mean that more of the company's revenue growth should trickle down to the bottom line.

The burger segment of the restaurant market is very crowded, and there's no reason for investors to believe that McDonald's (NYSE: MCD  ) , Wendy's (NYSE: WEN  ) , or Burger King will willingly make room for Steak n Shake. That said, there are regional chains that do quite well, offering food and service a cut above the fast-food norm. Ardent Steak n Shake supporters feel the company fills that niche. At the moment, I'm not so sure it's much different from Friendly Ice Cream (NYSE: FRN  ) , another company with good shakes and ice cream -- but mediocre food.

Management has also repeatedly stressed that it is running this business for the long term. Overall, that's something that I applaud, but I'd feel much more confident in Shake n Steak's long-term potential if more of the company's revenue growth made it to the bottom line.

We're cooking up related Foolishness:

• Shake a Leg, Steak 'n Shake!
• Steak 'n Shake Pours It On

Nathan Parmelee has no financial interest in any of the companies mentioned. The Motley Fool has an ironclad disclosure policy.