Goodbye, ruby Tuesday
Who could hang a name on you?
-- Rolling Stones

Casual dining restaurant operator Ruby Tuesday (NYSE: RT) reports third-quarter results after tonight's closing bell. She comes and goes, and last time we checked in, things didn't look so hot. Have the fortunes turned in the last six months? Let's find out.

What Fools say:
Here's how Ruby Tuesday's CAPS rating stacks up against some of its peers and competitors:

Market Cap (millions)

Trailing P/E Ratio

CAPS Rating

Darden Restaurants (NYSE: DRI)

$4,540

13.7

**

Brinker International (NYSE: EAT)

$1,970

9.6

**

Texas Roadhouse (Nasdaq: TXRH)

$806

20.5

***

Ruby Tuesday

$421

7.5

*

BJ's Restaurants (Nasdaq: BJRI)

$403

34.7

**

Data taken from Motley Fool CAPS and Yahoo! Finance.

In an almost universally disliked sector, Ruby Tuesday gets less love than most. Our CAPS bears feel that some casual dining chains won't make it through this recession, including good ol' Ruby. The bulls think that this stock is undervalued, especially now that the chain is repositioning itself with remodeled stores and higher-quality menu items.

What management does:
If there is a bright side to these numbers, it's that the cash flow margin is higher today than it was a year ago. Everything else is a right mess, particularly the decelerating growth rates -- or should I say shrinkage rates? Let's move on.

Margins

9/2006

12/2006

3/2007

6/2007

9/2007

12/2007

Gross

43.4%

43.3%

43.2%

42.8%

42.4%

41.6%

Operating

12.5%

12.1%

12.1%

11.3%

10.4%

8.6%

Net

7.5%

7.3%

7%

6.5%

5.7%

3.9%

FCF/Revenue

2%

3.3%

4.9%

4.2%

3.9%

3.9%

Growth (YOY) 

9/2006

12/2006

3/2007

6/2007

9/2007

12/2007

Revenue

16.1%

16.0%

14.6%

8.0%

6.1%

1.7%

Earnings

6.4%

8.2%

3.6%

(9.2%)

(19.5%)

(46.0%)

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:
Management says that the rebranding process is complete, but that the sales improvement they were hoping for in return hasn't materialized. The culprit is, of course, the weak economic environment and its effect on consumers' dining habits.

It's also never a good sign when a company has to sit down with its credit providers to ask for waivers to the default covenants on the existing credit facilities. Yep, Ruby Tuesday recently did just that, and suspended its store opening program until entirely new loans or lines of credit can be established with less stringent performance requirements.

Lose your dreams and you could lose your mind. Ruby Tuesday still seems unable to chase down her dreams of moderately upscale dining mastery, so I'll have to side with the skeptics on this one.

Ain't life unkind?

Delicious and nutritious Foolishness: