Why Luby's Looks Delicious Long Term

Based on the aggregated intelligence of 180,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, restaurant operator Luby's (NYSE: LUB  ) has earned a coveted five-star ranking.

With that in mind, let's take a closer look at Luby's and see what CAPS investors are saying about the stock right now.

Luby's facts

 

 

Headquarters (founded)

Houston, Texas (1947)

Market Cap

$235.5 million

Industry

Restaurants

Trailing-12-Month Revenue

$358.3 million

Management

CEO Christopher Pappas (since 2001)

CFO K. Scott Gray (since 2007)

Return on Equity (average, past 3 years)

2.7%

Cash/Debt

$2.9 million/$25.5 million

Competitors

Denny's 

Sources: S&P Capital IQ and Motley Fool CAPS.

On CAPS, 85% of the 75 members who have rated Luby's believe the stock will outperform the S&P 500 going forward.

Just last week, one of those Fools, czheng393, offered a balanced take on the Luby's opportunity:

The restaurants are well-run and franchises are kept under a close watch for quality assurance. However, comp sales have decreased. This decrease is attributed to lower customer discretionary spending due to the economy as well as inflation. However, management says that they are leaning toward franchising more restaurants, which will deflect the costs of expansion. ... If they are able to get their food costs under control, which they are in the process of doing, they will be much better positioned for greater earnings in the future along with more franchised stores. Another note is that many restaurants are currently being renovated, this may be able to further attract customers. A downside is that even if all such measures are implemented, [Luby's] will still have trouble garnering increased income per store due to the prevailing economic conditions.  

If you want market-thumping returns, you need to put together the best portfolio you can. Of course, despite a strong five-star rating, Luby's may not be your top choice.

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