I have fond memories of Denny's
These days, I drive by Denny's all the time, but I think it's been a good three to four years since I actually set foot in one of the 24/7 eateries. I guess I'm not like most of you, since Denny's has been posting some pretty impressive comps this year. The momentum slowed in the third quarter, with comps growing a mere 1.5% for the period, but at least it's popularity is still growing at the store level.
Revenues, though, rose by just 0.6% for the quarter ending in September. How can comps grow faster than a company's top line? Here's how: There are fewer units open now than a year ago. Denny's wrapped up the quarter 27 locations lighter.
No, that isn't an encouraging sign. The company did post a narrower loss, but that certainly isn't going to excite anyone hungry for a restaurant growth stock. The balance sheet is still a slippery skillet. And the substantial debt is enough to flip assets and liabilities to the point where Denny's is sporting a negative book value. That's not necessarily a deal-breaker for investors, though one has to understand that a leveraged company leaves itself with little wiggle room in case of failure.
Then again, watching P.F. Chang's
Denny's is a Motley Fool Hidden Gems Watch List stock.
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Longtime Fool contributor Rick Munarriz thinks he may give Denny's a chance sooner rather than later. He does not own shares in any of the companies mentioned in this story. The Fool has a disclosure policy. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.