Hibachi-grill pioneer and aspiring sushi restaurateur Benihana (NASDAQ:BNHN) is the little company that can, and with only about $270 million in annual sales, it has plenty of room to grow as it opens namesake stores and the Ra sushi concept across the country. Management has recently ramped up its store expansion ambitions and continues to aggressively remodel older locations. Tomorrow's first-quarter results will lend insight into how management is balancing growth and store remodeling.

What analysts say:

  • Buy, sell, or waffle? Eight analysts currently follow Benihana; all are bullish on the stock. The Motley Fool CAPS community doesn't seem to agree, offering the company a mere two out of five stars.
  • Revenue. Analysts are projecting $88.5 million in second-quarter sales, or close to 11% more than last year's second-quarter sales amount. 
  • Earnings. Analysts expect quarterly earnings of $0.28, only a penny more than the $0.27 reported last year.

What management says:
Back when the company released first-quarter results, management mentioned it would no longer be providing quarterly earnings guidance. It will continue to offer annual projections, though, and expects fiscal 2008 sales of $300 million to $305 million as it opens two namesake restaurants, six Ra locations, and two Haru stores, the last of which offer Japanese fusion-style food.  

What management does:
Benihana has a solid history of sales, earnings, and cash flow growth, and internally generated capital has historically proved ample to fund new store growth and the maintenance of existing locations. More recently, though, management plans to develop "more locations than at any other time in our 43 year history" and "put in place a new credit facility that will provide the capital necessary to finance our growth."

Margin

01/06

03/06

07/06

10/06

12/07

04/07

Gross

19.6%

19.6%

19.0%

18.4%

18.0%

18.6%

Operating

11.0%

9.9%

9.1%

8.6%

8.2%

9.3%

Net

5.4%

5.9%

5.8%

5.6%

5.5%

5.3%
All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

One Fool says:
I'll defer to Benihana's reputation as a steady, conservative growth company for now, but its recent decision to ramp up growth and possibly increase debt to expand leaves my stomach slightly queasy. Spending to remodel stores is also a worthy endeavor, but the collective increase in capex leaves further downside protection should consumers decide to spend less eating out (or decide to try the menus at other expanding casual-dining concepts, including P.F. Chang's (NASDAQ:PFCB), Texas Roadhouse (NASDAQ:TXRH), or Red Robin Gourmet Burgers (NASDAQ:RRGB)).

Granted, Benihana and its three primary restaurant concepts are unique when it comes to publicly traded competitors, but there are plenty of mom-and-pop peers to contend with in regard to similarly prepared fare. The space is definitely crowded, and Benihana has successfully competed for years, but I'll dine in until I have a better handle on how the increased growth ambitions work out for the company.

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Fool contributor Ryan Fuhrmann has no financial interest in any company mentioned. Feel free to email him with feedback or to discuss any companies mentioned further. The Fool's disclosure policy always orders the Shrimp Tempura Yaki-Udon.