Flipping pancakes can be good for your financial health.
The concept notched its 15th consecutive quarter of positive comps, but that streak may be tested. Third-quarter comps clocked in 1.3% higher, but the average check per guest dipped for the period. That's a testament to IHOP's ability to increase traffic into its syrupy sweet booths, but it will create problems if that stabilizes and patrons continue to spend less than they used to at the eatery.
Another reason to worry is that more companies are digging deeper into the morning menu that has been IHOP's bread and butter over the years. Starbucks
IHOP did raise its guidance for the year -- up to a range of $2.35 to $2.40 a share -- and that includes stock-based compensation charges. It assures IHOP of another year of bottom-line growth, and it's a comforting sight for Wall Street that had its analysts betting on profits per share coming in at $2.37 this year.
That's fine, but I'm still a bit uncomfortable with paying more than 20 times earnings for a mature eatery concept like IHOP, especially with the battle over breakfast that I see looming and the perpetual challenge for the concept to grow its lunch and dinner business. Sorry, IHOP. "Come hungry, leave happy," may be the company's latest slogan, but I don't know if new investors will feel the same way.
For more dish on diners, check out:
Starbucks has been recommended by David Gardner for his Stock Advisor subscribers. Take the newsletter for a 30-day free spin.
Longtime Fool contributor Rick Munarriz enjoyed the stuffed French Toast he had at IHOP earlier this month, but he would much rather make the longer drive to Original House of Pancakes when he has a craving for pancakes. He does not own any of the stocks mentioned in this story. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.