At one time, Dave & Buster's
Remember when Dave & Buster's was almost taken private? The entertaining eatery was a major casualty of the recession. As jobs and discretionary income dwindled, the allure of its pricey fun faded like Pong. Bubble-era excess guilt, 9/11, and the fact that so many Americans were struggling to stay afloat were all perfectly good reasons why Dave & Buster's suffered after the boom years.
However, Rick Munarriz, a longtime Fool, first called it last September: Dave & Buster's started showing signs of life. He went on to single out Dave & Buster's in December as one of Five Tasty Stocks, pointing out that it could be "the restaurant outfit with the most to gain from an improving economy," which seems to be coming to pass.
Indeed, consumers are in a better mood right now, and that has been a boon for Dave & Buster's. There's also the popularity of gaming right now, as gamers defy age and gender barriers -- one reason why Electronic Arts
However, we've already seen that this is a food- and entertainment-oriented company that suffers quite a hefty blow when the economy takes a downturn and consumer confidence lags. That's one area that buy-and-hold investors should always keep in mind.
A 47% increase in second-quarter earnings is certainly nothing to complain about. However, the company's top line seemed a bit sluggish, with a 1.7% increase in sales. Yesterday, the stock ended the day 13.3% higher, as some investors (bearing in mind that this is a thinly traded stock) celebrated the positive aspects of the report.
Right now, shares of Dave & Buster's are lingering near the top of their 52-week range, having increased 47% since the beginning of this year, and are trading at 20 times forward earnings. There are many reasons Dave & Buster's is seeing improving fortunes, and it's likely that it will see growth ahead. Still, whether the days when the stock could be considered a bargain have come and gone is another question altogether.
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Alyce Lomax does not own shares of any of the companies mentioned. Being a big fan of "shoot indiscriminately with a plastic gun" games, she's usually played something like House of the Dead whenever she's found herself at Dave & Buster's.