Dave & Buster's Entertainment (NASDAQ:PLAY) has been a rare winner in casual dining, but that wasn't the case last week. Shares of the "eatertainment" chain tumbled 11.9% last week, after the company offered up uninspiring guidance in Tuesday's earnings announcement.

Revenue climbed 15% to $280.8 million for the fiscal second quarter, more on the strength of opening new locations than a pedestrian 1.1% uptick in comparable-store sales. The bottom line grew even faster, as adjusted earnings per share rose from $0.50 to $0.59. Analysts were holding out for a profit of just $0.57 a share but on a more robust $282 million in revenue. Dave & Buster's has now exceeded Wall Street's profit targets in each of its first 12 quarters as a public company. 

A mixed quarter isn't fatal, but Dave & Buster's sealed its fate when it adjusted its full-year guidance. It's sticking to its earlier target of $1.16 billion to $1.17 billion in revenue, but that's a combination of opening two more locations this year -- as it opens 14 new stores in fiscal 2017 instead of a dozen -- and lowering its comps forecast to a full-year forecast of 1% to 2% growth instead of a 2% to 3% uptick. Dave & Buster's net income guidance is now inching higher, but EBITDA is going the other way, given higher pre-opening costs and a litigation settlement. Mixed guidance when paired up with a mixed quarter is enough to deal a blow to a market darling of a growth stock.

Four adults playing games at Dave & Buster's.

Image source: Dave & Buster's.

Getting back into the game

The stock sell-off prompted a few Wall Street pros to offer up support. Andrew Strelzik at BMO Capital sees last week's slide as a buying opportunity, arguing that the weakness in core EBITDA is modest. Lynn Collier at Canaccord feels that same, sticking to her long-term bullish thesis. She did lower her price target on the shares from $75 to $72, but that still represents a beefy 41% in upside off present levels. Jake Bartlett at SunTrust blames the lackluster unit-level guidance on Hurricane Harvey and challenging comparisons to the latter half of last year. 

It was a disappointing quarterly report. The weaker-than-expected 1.1% comps growth may be enough to stretch Dave & Buster's streak of exceeding the competitive casual dining benchmark to 21 quarters, but it's a deceptive showing. Strength on the amusements front is masking a decline on the food and beverage end. Restaurant comps actually declined.

The silver lining in having the arcade fare better than the eatery is that the arcade is where Dave & Buster's collects its chunkier margins. Another thing Dave & Buster's is doing that will prop up its bottom-line results is aggressively buying back shares. It repurchased roughly a million shares during the quarter, and it expanded its buyback authorization by another $100 million last week after the sell-off made eating its own cooking more compelling.

The market was concerned about lackluster comps last week, but let's not underestimate the potent combination of rising net income divided into a shrinking diluted share count. Dave & Buster's has proved itself mortal in this restaurant recession, but its guidance now points to a profit per share of $2.55 to $2.65 this fiscal year. The stock is trading at less than 20 times the midpoint of that range, a bargain for a best-of-class concept with a lot of expansion room. 

Rick Munarriz has no position in any of the stocks mentioned. The Motley Fool recommends Dave & Buster's Entertainment. The Motley Fool has a disclosure policy.