Dave & Buster's
So what caused investors to lose their appetite for D&B's stock? Stale-tasting earnings that limped forward 2.8% to $7.2 million, compared with the $7 million of net income in the year-ago period.
But even though its earnings struck out, the company did score a hit with its revenues. Total sales were up 21.4% to $121.4 million. Revenue from food and beverages increased 26%, while entertainment sales grew 15.9% for the quarter.
How can sales go up, but earnings be down? The answer is found somewhere in the vicinity of its expenses. Food and beverage costs rocketed 25% to $16.3 million, while total operating expenses for the quarter were $86.1 million, higher by 24.6% compared with a year ago. D&B blamed a part of its higher operating costs on Sarbanes-Oxley compliance.
The end result is a quarter that produced flat earnings growth at $0.46 per share. For the year, though, earnings were $0.87 per share, up from $0.79 a year ago. And looking ahead, the consensus among analysts is for D&B to bring in net income of $1.18 per share for the current fiscal year. But given its recent struggles, this expectation appears a tad high. If D&B maintains the present pace of 10% EPS growth, then we can expect around $0.96 per share for the current year.
At a price of around $16.50, D&B's stock is valued at 17 times current-year earnings. Using a blended growth rate of 15%, this stock is not terribly expensive. That said, Foolish investors looking to outdo the market average will want to look for a deeper discount before picking up shares.
Looking for further Foolish analysis on D&B? Check out these articles:
- D&B A-OK
- Is D&B Down and Broken?
- Dave & Buster's Plays On
- Not Totally Entertained
- Dave & Bustin' Loose
Fool contributor Jeremy MacNealy does not own shares in any of the companies mentioned.