Has premium hot-dog purveyor Nathan's Famous
The Coney Island institution's second-quarter results have propelled shares to a new 52-week high. But while the stock is one of the largest percentage-gainers on the Nasdaq this morning, this 13-year chart shows a stock-price soup bowl. Nathan's is trading near $10 for the first time since 1993. To me, it looks like a great picture of former road kill on the rise.
So why is Nathan's finally cooking again? Revenue for the latest quarter was up 22.8% year over year. Fueling that gain was a 49.5% hike in "branded product" -- fancy Nathan's talk for food-industry sales. That segment now accounts for 48.5% of total sales.
Two of the company's other business segments produced positive results. The six wholly owned Nathan's restaurants saw sales increase 4.2%; they still account for 46.9% of the company's total revenue. Royalties and franchise fees from the company's 361 domestic and international franchised restaurants -- under the Nathan's, Miami Subs, and Kenny Rogers names -- were up 4.1%, comprising 19.8% of sales. Overall, earnings from continuing operations increased a strong 25.8%.
The lone laggard, luckily, is also the smallest business operation. License income, which comes from the sale of Nathan's frankfurters to supermarkets and club stores, fell 5.8%. That's not good news, but the segment only composes 9.5% of total sales.
The big news for long-term investors is that Nathan's has posted better year-over-year profits for 10 consecutive quarters. Sale of land, sale of a company-owned restaurant to a franchisee, and the company's cash from operating activities has allowed Nathan's to build up $5.2 million in cash and equivalents and $16.1 million in marketable securities.
It's also worth noting that the company was wise enough to buy its own stock during the low ebb of its share price. Since 2001, the company has spent $7.2 million to buy 1.9 million shares at an average price of $3.79 a share.
The stock has settled back from its high, but it's still trading up 9.7% in early afternoon trading. While Nathan's does not provide earnings guidance, and there is no conference call for investors, this tiny company with a $55.4 million market capitalization has a hefty bankroll with which to grow its business.
Investors need to remember that Nathan's is no Kraft Foods
For now, Nathan's has recovered nicely by restructuring, co-branding its restaurants, and broadening its frankfurters' sales channels. Still, its long-term plans aren't clear. Until the company becomes more forthcoming, I'd opine that the stock price will plateau at current levels. Looking at the company's operating realm, I'm simply not able to reasonably forecast similar share-price growth in the absence of a more defined plan.
Fool contributor W.D. Crotty owns shares in McDonald's and wishes Nathan's had a multi-branded Miami Subs location in his neighborhood. Kraft is a Motley Fool Income Investor pick. Click here to see the Motley Fool's disclosure policy.
