Ruby Tuesday Dropped: What You Need to Know

Don't let it get away!

Keep track of the stocks that matter to you.

Help yourself with the Fool's FREE and easy new watchlist service today.

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Ruby Tuesday (NYSE: RT  ) topped The Wall Street Journal's survey of the day's worst decliners Friday -- down 14% when all was said and done.

So what: And the company has no one to blame but itself. In addition to missing the Street's earnings estimate by a dime yesterday, management warned that fiscal 2012 won't be so hot, either. Fiscal Q4 2011 brought Ruby just $0.21 per share, and management's projecting about that much in earnings per quarter all through the current fiscal year as well. Best case: $0.85 per share, but perhaps as little as $0.75.

Now what: Pretty miserable news, right? No wonder folks are selling. But hold up one sec before you, too, head for the exits. Yes, Ruby's earnings disappointed. Yes, it ended fiscal 2011 with just $46.9 million in profits. But according to management, the company's actual free cash flow was quite a bit more than that -- $90 million. Even better, management promised to maintain or even improve on that FCF number this year, despite increased capex spending that's needed to spruce up its restaurants and give them a more upscale feel.

Result: Post-sell-off, we're now looking at a company that sells for barely 6 times free cash flow yet projects flat-to-10% FCF growth in the current year and is pegged for 13% long-term growth by the analysts who follow it. Does that sound to you like something that deserves a 14% selloff?

Doesn't sound that way to me, either.

So who's right? Rich, or the investors who waved goodbye to Ruby Tuesday today? Add the stock to your Watchlist and find out.

Fool contributor Rich Smith holds no position in any company mentioned. Check out his holdings and a short bio. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Read/Post Comments (0) | Recommend This Article (6)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 1523697, ~/Articles/ArticleHandler.aspx, 10/21/2016 8:07:18 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 10 hours ago Sponsored by:
DOW 18,162.35 -40.27 -0.22%
S&P 500 2,141.34 -2.95 -0.14%
NASD 5,241.83 0.00 0.00%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

10/20/2016 4:02 PM
RT $3.04 Down +0.00 +0.00%
Ruby Tuesday CAPS Rating: *