Luby's (NYSE:LUB) has been serving home-style food at value prices since 1947. It's a Texas-based institution, although it has stores in five states. Today it surprised investors and analysts alike with extremely strong first-quarter operating results.

The current quarter, ended Nov. 23, was the eighth consecutive to produce positive same-store results. This quarter's increase was 6.9% compared with the comparable quarter last year. What cheered investors, though, and sent the stock up 11.0% (at its highest) was net income of $0.08 a share. That beat the estimate of both analysts that follow the company, and the company's revenue topped their highest forecast, as well.

For the last two years, the company's first quarter has served up losses. Part of the reason for the losses has been the March 2003 business plan the company enacted to close underperforming properties (what an idea!) and use the proceeds from the sale of those properties to pay down debt. Ah, home-style food and clear corporate thinking. What a combination.

The quarter was also affected by Hurricane Rita, which passed through Texas. Even after losing 236 store days to the storm, the company still pulled out a great quarter.

At the end of fiscal 2005, the company's debt level sat at a nine-year low. The company trimmed off another $3.5 million this quarter, and total debt now stands at a tiny $10 million (for a debt-to-equity ratio of a lowly 6.8%). That's a big improvement from the $124.3 million the company lumbered under at the end of fiscal 2002.

Luby's is an interesting company. Total sales have increased in each of the last three fiscal years. During the same period, the number of restaurants opened decreased from 148 to 131 -- and the company made a profit only in 2005.

Now that its operations are clearly on a solid footing, it's going to start building new units. The first two will open, in Texas, of course, in fiscal 2007.

Analysts are not wowed by the company's prospects. They're forecasting 4.5% annual earnings growth for the next five years (well below the 10.5% expected from the S&P 500).

Luby's is currently trading at 21.1 times earnings for the fiscal year ending August 2007. Compared to the forward multiples of Applebee's (NASDAQ:APPB), Brinker (NYSE:EAT), Darden (NYSE:DRI), and Outback (NYSE:OSI), which range between 15.4% and 16.9%, Luby's pricing looks downright ridiculous.

But consider this: This is a company whose management is delivering results. The company also owns the property for 93 of its 131 restaurants, so there's also real estate wealth to consider here. And instead of borrowing to restructure and build, this company has decided to downsize, improve operations, and use its cash flow to add restaurants.

This company is working on a recipe for business success that this observer likes. Because of the high multiple, the stock is not poised for explosive growth. But there's still room for operating margin improvement (6.1% for the trailing 12 months is below its peers), while the company gets ready to start opening new restaurants.

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Fool contributor W.D. Crotty does not own any shares in the companies mentioned but salutes Luby's for telling its shareholders that 2006 is the year they will focus on the restrooms. Ah, there are no secrets at this company! Click here to see The Motley Fool's disclosure policy