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Today's investor must look far and wide to satisfy their appetite for quality stocks. Multinational, emerging foreign national, and regional operators can add spice and sizzle to your portfolio performance.

As an expatriate living in Brazil, one way I watch for investment opportunities is by keeping an eye on the local products I see every day. Brazilians love fast food but they are shy about trying foreign things. That helps to explain why Brazil Fast Foods Corporation (OTCPK:BOBS) has grown to be the second largest fast food chain in Brazil.

The company has been dishing up burgers and fries to a nation of meat and salty fried food lovers for over 60 years. BOBS knows Brazilians and is known by Brazilians. Its quality management team and knowledge of the local culture give it the edge while facing its chief competitors, McDonald's (NYSE:MCD) and Subway (privately held).

Seeking Alpha's contributor Jason Rivera's excellent article last December brings together all the statistical growth and financial information on BOBS. I refer the interested reader to his discussion rather than duplicating the effort here. I will summarize some of the highlights:

BOBS has had a turbulent financial history since going public initially in 1994. The company dished up losses each year through 2003. In 2004 it managed to eke out a small profit while setting out upon a massive growth program to be viable in the highly competitive fast food franchise business.

BOBS also is a partner with Yum Brands (NYSE:YUM) to bring international brand labels KFC and Pizza Hut to its store operations. The multi-brand stores bridge the culture gap between Brazil and the global multinational names. This creates added value for both BOBS and its partners.

BOBS share price performance finally crawled out of the $0.20 penny stock cellar in 2004. It has been strengthening for the most part ever since (with an exception of a pull back down to around $3.00 in the turbulent 2008 - 2009 financial crisis).

In 2007 BOBS implemented its strategy of multi-brand restaurant operation through its agreement with Yum Brands to open KFC restaurants in Brazil. In 2009, BOBS expanded to include operating Pizza Hut restaurants in Brazil and acquired Doggi's hot dog chain. In 2012 BOBS continued to broaden its brands by acquisition of Yoggi's frozen yogurt and smoothie company.

Since 2007, the company has expanded its number of stores at a steady pace of about 100 additions per year, growing from 580 in 2007 (58 company owned, 522 franchise) to 984 stores through the third quarter 2012 (71 company owned, 913 franchise). This expansion gives BOBS a presence in every State of Brazil as well as outlets in Angola and Chile.

Revenue for the company shows steady growth in all categories:

Revenue (Millions of Brazilian Reals)

Likewise, BOBS margins are solid and growing:

(from Rivera's article referenced above)

A comparison on BOBS financial ratios and returns also provides a compelling argument that it is an excellent value at its current price. Its present P/E of 11.7 compares well with MCD's P/E of 17.1 and puts it in the solid ranks of the restaurant industry's average P/E of 20.5. Likewise, return on equity for BOBS is 33.22%, comparing well with McDonald's ROE of 38.65% and solidly overachieving the restaurant industry average ROE of 30.80%. In fact, measured on ROE, BOBS outperforms such household names as Papa John's (NASDAQ:PZZA) ROE of 30.12%, Cracker Barrel (NASDAQ:CBRL) ROE of 29.43%, Starbucks (NASDAQ:SBUX) ROE of 28.84%, and many more as shown in the restaurant industry table below.

BOBS debt/equity ratio of 36.76 is similar to the McDonald's 38.65 ratio and much stronger than the industry average debt/equity of 85.3. A price/book ratio of 3.149 suggests BOBS is a very good value compared to MCD's 6.938 p/b ratio and the industry's average 13.6 p/b ratio.

Gross revenues and margins are on the rise as seen in the annual data for 2009 - 2011 and the quarterly data for 2012. The rising numbers hold true for net income also:

BOBS gross and net margins continue to rise as the benefit from the economies of scale that come with its growth program, a key phenomena in this competitive industry and one that should continue to improve along with growth. A glance at MCD's 20.8% net profit margin compared to BOBS' latest net profit margin which has risen to match an industry average 9.8% shows room for the company to still double net margin with further economies of scale associated with continuing growth.

RESTAURANT INDUSTRY FIANCIAL DATA (by ROE)
Description
Market Cap
P/E
ROE %
Debt to Equity
Price to Book
Net Profit Margin
Price To FCF
Services
58444.75B
24.60
15.647
133.975
0.957
5.542
72.083
Restaurants
3482.45B
20.50
30.8
85.03
13.6
10
38.1

AFC Enterprises Inc.

700.92M
26.08
162.242
218.959
26.054
17.738
137.436

Krispy Kreme Doughnuts, Inc.

846.61M
5.72
92.975
10.762
3.517
4.71
136.773

Sonic Corporation

NA
NA
76.861
1045.62
NA
4.867
NA

Diversified Restaurant Holding

77.90M
58.71
74.497
894.274
34.831
1.432
-44.696

Yum! Brands, Inc.

29.79B
19.39
73.677
129.158
13.563
13.197
71.562

DineEquity, Inc.

1.36B
10.27
67.625
520.636
5.758
28.002
18.88

Brinker International, Inc.

NA
NA
50.501
281.297
NA
5.39
NA

Domino's Pizza Group PLC

82.49B
2849.16
48.427
70.15
1328.12
13.871
10789

Jubilant Foodworks Ltd.

77.88B
75.94
42.358
5.173
26.285
9.835
NA

Media Asia Group Holdings Ltd

919.82M
5.39
40.565
81.728
1.707
-34.808
NA

McDonald's Corp.

96.33B
17.91
38.655
95.534
6.938
20.082
NA

Tim Hortons Inc.

7.74B
19.09
35.516
40.062
6.513
13.179
53.27

Asia Green Agriculture Corp.

18.41M
0.52
33.365
9.273
0.147
38.961
17.741

Brazil Fast Food Corp.

82.92M
11.37
33.215
36.763
3.139
9.8
60.231

CEC Entertainment Inc.

572.67M
12.56
31.87
270.174
3.911
3.965
90.358

Papa John's International Inc.

1.31B
22.55
30.115
22.956
6.236
4.04
106.186

Cracker Barrel Old Country Sto

1.55B
15.10
29.43
137.502
3.849
3.696
-65.166

Fairwood Holdings Ltd.

2.11B
15.64
29.212
6.228
4.488
6.58
49.027

Starbucks Corporation

40.91B
29.37
28.841
10.62
7.91
11.375
62.191

Restaurant Brands NZ Limited

276.90M
17.05
28.461
11.887
4.829
4.103
53.305
Kona Grill Inc.
74.70M
17.07
27.136
2.213
4.033
4.119
606.681

Restaurant Group (The) PLC

75.41B
1775.94
26.819
26.77
430.778
7.664
22194.2

Wetherspoon (J D) PLC

61.83B
1441.01
26.163
328.146
364.606
3.39
4679.78

Darden Restaurants, Inc.

6.06B
13.38
25.746
157.4
3.252
1.714
NA

Punch Taverns PLC

7.45B
146.10
24.909
1480.02
35.714
11.713
-1385.12

Chipotle Mexican Grill, Inc.

9.85B
36.36
23.764
0.272
7.547
10.321
122.318

Panera Bread Company, Inc.

NA
NA
22.929
NA
NA
6.898
NA

MTY Food Group, Inc.

476.10M
23.27
21.957
8.049
4.727
25.286
50.282
Whitbread PLC
NA
NA
21.318
44.769
NA
17.1
NA

Burger Fuel Worldwide Limited

97.80M
120.67
19.944
NA
22.346
5.769
2975.01

Ark Restaurants Corp.

57.37M
10.77
19.852
5.776
1.759
5.056
15.36

Dunkin' Brands Group, Inc.

NA
35.71
19.641
528.597
11.054
21.233
NA

Tao Heung Holdings Ltd.

4.77B
17.76
19.555
2.265
3.277
7.22
-256.537

Tao Heung Holdings Ltd.

NA
NA
19.555
2.265
NA
7.22
NA

The Cheesecake Factory Incorpo

1.78B
17.62
19.179
9.76
3.085
5.985
111.266

Cheesecake Factory, Inc.

NA
NA
19.179
9.76
NA
5.985
NA

Bravo Brio Restaurant Group, I

295.75M
18.47
18.628
23.762
2.991
2.947
189.404
Nathans Famous
NA
NA
18.443
NA
NA
7.068
NA

Nathan's Famous Inc.

182.84M
27.15
18.443
NA
5.228
7.068
108.176

Einstein Noah Restaurant Group

221.56M
14.24
17.799
73.222
2.366
3.236
73.735

Einstein Noah Restaurant Group

NA
NA
17.799
73.222
NA
3.236
NA

Retail Food Group Limited

362.67M
12.66
17.484
66.013
2.128
72.092
60.303

A&W Revenue Royalties Inc

251.47M
18.88
16.756
60.63
3.079
59.35
84.659

Buffalo Wild Wings Inc.

1.40B
25.98
16.226
NA
3.827
4.338
151.256

Ruth's Hospitality Group Inc.

269.71M
NA
15.431
88.498
3.445
0.946
228.447

Jack In The Box, Inc.

NA
NA
15.398
102.253
NA
3.489
NA

Jack in the Box Inc.

1.26B
22.97
15.398
102.253
3.136
3.489
19.779

Cafe de Coral Holdings Ltd.

13.36B
26.53
15.339
NA
4.052
7.052
813.16

Cafe de Coral Holdings Ltd.

NA
NA
15.339
NA
NA
7.052
NA

BreadTalk Group Ltd.

219.23M
18.57
15.25
70.725
2.796
2.903
-16.801
Autogrill
2.40B
23.57
14.028
187.543
2.828
5.124
17.281
Autogrill
NA
NA
14.028
187.543
NA
5.124
NA

Texas Roadhouse, Inc.

1.26B
18.40
13.646
10.096
2.29
5.853
131.177

Soup Restaurant Group Limited

35.82M
15.00
13.549
NA
2.105
3.597
52.021

Soup Restaurant Group Limited

NA
NA
13.549
NA
NA
3.597
NA

Noble Roman's Inc.

19.52M
18.52
12.658
35.639
1.618
21.769
115.348

Famous Dave's of America Inc.

71.46M
18.56
11.679
73.324
2.133
2.117
-40.665

SIR Royalty Income Fund

NA
NA
11.349
NA
NA
70.584
NA

Bob Evans Farms, Inc.

1.22B
18.54
10.358
30.681
1.896
2.517
-114.799

BJ's Restaurants, Inc.

899.27M
27.20
10.071
NA
2.482
3.903
-31974

Del Frisco's Restaurant Group,

371.44M
22.08
9.846
NA
2.184
-5.058
-51.179

Rick's Cabaret International I

81.64M
10.90
9.488
72.511
0.969
6.092
22.658
Rick's Cabaret
NA
NA
9.488
72.511
NA
6.092
NA
Alsea SAB de CV
NA
NA
9.319
98.789
NA
2.406
NA
Alsea SAB de CV
18.67B
61.57
9.319
98.789
5.668
2.406
70.521

Sportscene Group Inc.

33.32M
11.59
9.258
59.87
1.056
2.868
-40.308

Heavitree Brewery PLC

1.71B
2163.46
9.188
66.531
193.188
6.533
24885.1

Thai Village Holdings Ltd.

22.85M
13.75
8.747
NA
1.222
4.84
229.961

Red Robin Gourmet Burgers Inc.

529.98M
22.39
8.252
43.375
1.726
1.656
82.328

Burger King Worldwide, Inc.

6.23B
0.73
7.199
273.958
5.553
1.463
79.477

Mitchells & Butlers PLC

135.39B
1952.94
6.422
230.79
124.438
3.696
5084.96

Mitchells & Butlers PLC

NA
NA
6.422
230.79
NA
3.696
NA

Frisch's Restaurants, Inc.

93.76M
20.86
6.204
24.604
1.231
4.122
21.9

Country Style Cooking Restaura

207.59M
26.53
6.064
NA
1.513
9.746
-107.954

Chuy's Holdings, Inc.

480.74M
152.53
5.855
5.887
5.667
1.76
-115.994

Ajisen (China) Holdings Ltd.

6.05B
42.98
5.155
3.647
2.121
3.087
260.927

Ajisen (China) Holdings Ltd.

NA
NA
5.155
3.647
NA
3.087
NA

Biglari Holdings Inc.

454.34M
28.48
5.128
65.185
1.316
2.74
1908.98

Grupo Gigante, S.A.B. de C.V.

25.05B
153.66
4.453
2.507
1.388
4.522
-322.232
Luby's, Inc.
204.39M
30.34
4.234
6.65
1.181
0.162
106.264
Bernard Loiseau
NA
NA
4.153
7.276
NA
7.804
NA

Keg Royalties Income Fund

NA
NA
3.554
13.942
NA
20.694
NA

Imvescor Restaurant Group

52.48M
28.41
3.502
66.452
0.884
0.957
22.41
JALUX Inc.
NA
NA
3.131
20.485
NA
1.124
NA

Enterprise Inns PLC

46.44B
1056.82
3.118
200.842
32.597
-2.571
3203

Enterprise Inns PLC

NA
NA
3.118
200.842
NA
-2.571
NA

Nordic Service Partners

NA
NA
2.7
149.848
NA
1.995
NA

Carrols Restaurant Group, Inc.

145.59M
NA
1.114
162.611
1.463
-3.95
50.812

The Wendy's Company

2.01B
641.25
0.199
73.911
1.017
3.554
NA

Pizza Inn Holdings, Inc.

29.44M
NA
0.176
36.537
4.675
-0.556
-108.623

Boston Pizza Royalties In

289.52M
NA
-1.265
20.25
1.954
-21.241
81.549

China Energy Develop

1.03B
NA
-2.051
3.059
0.3
-25.549
-259.652

China Energy Develop

NA
NA
-2.051
3.059
NA
-25.549
NA

Ruby Tuesday, Inc.

462.72M
NA
-2.445
56.546
0.853
-4.953
-30.83

Ruby Tuesday, Inc.

NA
NA
-2.445
56.546
NA
-4.953
NA

Dexon Energy Group Ltd.

1.13B
NA
-3.935
66.42
1.682
-40.184
-117.411
CMR
1.12B
NA
-4.401
27.067
1.25
0.138
-146.159

G-Vision International

310.31M
NA
-5.195
NA
2.353
-11.875
-432.143
Jamba, Inc.
204.93M
NA
-9.103
NA
10.271
6.267
76.293
Jamba, Inc.
1.44B
NA
-9.103
NA
72.093
6.267
535.494
Jamba, Inc.
NA
NA
-9.103
NA
NA
6.267
NA

Mexican Restaurants Inc.

4.61M
NA
-9.577
30.654
0.321
-2.699
-28.352
Marston's PLC
76.26B
NA
-13.965
181.535
100.075
-35.328
-9278.71
Marston's PLC
NA
NA
-13.965
181.535
NA
-35.328
NA

Food Junction Holdings Ltd.

23.18M
NA
-18.115
3.118
0.941
-40.162
-11.89

Good Times Restaurants Inc.

7.72M
NA
-23.114
52.914
2.525
-0.02
-2.591

Star Buffet Inc.

8.51M
NA
-31.871
131.552
0.758
-10.046
12.196
Cosi Inc.
60.49M
NA
-39.467
NA
3.79
-5.558
-64.031

United Power Investment Ltd.

544.88M
NA
-46.505
17.822
0.667
-61.379
-244.31

Spot Coffee (Canada) Ltd

8.88M
NA
-62.425
38.919
3.421
-15.124
-19.694

Good Times Restaurants Inc.

7.99M
NA
-87.225
261.056
2.681
-9.182
75.617

Chanticleer Holdings, Inc.

7.40M
NA
-95.386
14.11
1.174
-41.854
-6.435

Granite City Food & Brewery Lt

16.51M
NA
-262.225
2087.03
6.634
-2.855
-6.791

World Famous Pizza Co., Ltd.

0.00M
0.00
NA
NA
NA
NA
0
Valor Gold Corp.
40.62M
NA
NA
NA
NA
NA
-208.208

UFood Restaurant Group, Inc.

0.48M
NA
NA
NA
NA
-42.66
-6.116

Ignite Restaurant Group, Inc.

383.25M
26.46
NA
65.58
3.374
6.911
-125.579

Giggles N' Hugs, Inc.

11.45M
NA
NA
NA
16.667
-64.488
-35.054

Giggles N' Hugs, Inc.

6.18M
NA
NA
NA
9
-64.488
-18.929
Flo (Groupe)
126.49M
9.04
NA
65.885
0.823
2.844
NA

Fiesta Restaurant Group, Inc.

416.52M
76.93
NA
3096.86
63.138
2.847
-121.483

Eat At Joes Ltd.

NA
NA
NA
NA
NA
-53.661
NA

Domino's Pizza, Inc.

2.71B
26.76
NA
NA
NA
6.871
82.446

Domino's Pizza, Inc.

NA
NA
NA
NA
NA
6.871
NA

Denny's Corporation

NA
NA
NA
34908.3
NA
4.434
NA

Denny's Corporation

481.85M
4.63
NA
34908.3
856.667
4.434
37.457

China Nuclear Industry 23

1.92B
NA
NA
22.5
7.398
26.723
-618.551

Bloomin' Brands, Inc.

2.27B
33.21
NA
718.275
10.758
-3.764
-171.36

American Restaurant Concepts,

3.35M
NA
NA
NA
NA
26.397
143.946

ABR Holdings Ltd.

136.61M
1.75
NA
0.269
1.528
2.603
132.5

Brazil's own growth demographics add on as a multiplier of BOBS own growth. This further strengthens the case for a favorable outlook. The Rio Times reports a large and growing middle class with growing disposable incomes:

By Sarah de Sainte Croix, Senior Contributing Reporter

"RIO DE JANEIRO, BRAZIL - In 2011 Brazil's middle class was the biggest of all five of the country's 'official' classes, comprising 54 percent of the population. In the last year alone 2.7 million Brazilians moved up into the middle or 'C' class, according to a report entitled 'Observador Brasil 2012,' published by Cetelem BGN, part of the BNP Paribas group, in partnership with Ipsos Publics Affairs."

Brazil's population continues to grow also at a healthy rate.

Population density also continues to rise, supporting more customers per existing store territory and greater store density.

All these facts and figures boil down to a company with strong fundamentals and an existing advantage compared to its industry peers. Coupled to this is the low P/E multiple and price/book ratio. Add to this the insider edge of a long history serving food to Brazilians and knowledge of the cultural nuances important to serving the public in this environment. Finally, let's toss in the upcoming World Cup in 2014 and Olympics in 2016 - events with growth built in and suggesting new competitors arriving in Brazil or already in place may look for an acquisition to improve their position before these historic events. BOBS just might spell buy-out target in the near future.

If all this is not enough to stir excitement in this closely held dynamo, technical factors also may be about to herald the best of buy signals.

Beyond the compelling fundamentals, BOBS price chart history confirms that it adheres to the legendary golden cross as a strong predictor of long term up trends.

Since the lows of 2004 BOBS has seen 3 golden crosses:

1. On January 10, 2005 while still trading in the penny levels BOBS made the golden cross at $0.51 per share. It continued in up-trend staying above its 200 day SMA for the next 36 months (over 1,100 days) before dropping below to close at $6.50 on February 20, 2008. A gain of $5.49 (1,076%) for the holder who bought on the day of the golden crossing and held until the day of the death cross. Those who exited when the day's closing price dropped below the 200 SMA co-incidentally sold at $6.50 too, but did so on January 18, 2005, 33 days earlier than the death cross).

The First Golden Cross - January 10, 2005

2. On July 30, 2008 the next golden cross for BOBS was reached and the shares closed at $6.35. This was a short lived rally and the death cross was reached 62 days later on September 25, 2008 at an exit price of $5.64 (for a loss of $0.71 per share - 12.3%). However, taking the exit when the day's closing price first dropped below the 200 SMA gave an earlier exit on August 27, 2008 at $6.10 for a more limited loss of $0.25 - 3.9% after a hold of 28 days.

The Second Golden Cross - July 30, 2008

3. Gold was struck again a year later on August 21, 2009 at $3.40 per share and the up-trend continued for 810 days until November 10, 2011 at an exit price of $11.50 on the day following the death cross. An $8.10 gain - 238% profit. This time, an early exit when the day's closing price first fell below the 200 SMA came on September 22, 2011, 2 months sooner than the death cross and would have resulted in an exit price $10.51 - a full $1.00 below the death cross. Still, that is a profit of $7.11 - 209%.

The Third Golden Cross - August 21, 2009

BOBS is closely approaching it next golden cross. Savvy investors should be watching very closely. The history of the golden cross trading for BOBS is a map to wealth. But caution is wise also. From March 20 until April 11, 2012 the 50 SMA flirted with rising above the 200 SMA but failed to convert into a golden cross. The shares drifted down from $12.00 to a low of $6.55 following that failed cross.

Failed April 2012 Cross and Current Approaching Golden Cross

A very important word of caution: This stock trades OTC pink pages and is very thinly traded with 1,000 to 2,000 share per day average total volume. Any attempt to make a large trade will distort the market and is likely to result in extreme price swings. Investors should consider this factor and accumulate slowly and with the expectation that the shares will be rather illiquid during any exit signals. Caution is advised.

Is BOBS an ALPHA with staying power? Consider these points:

  • Sound fundamentals and low multiples compared to its peers and industry averages.
  • A good strategic plan implemented and continuing. One that shows results with a decisive turn around from its pre 2005 history through today.
  • An "Insider" recognized as a Brazilian product in a nation that is known to be slightly xenophobic in its food and vendor choices.
  • Chosen as a partner by global household names Coca-Cola and Yum Brands' - Pizza Hut and KFC
  • Growth in both width and breadth from the gross revenues to the bottom line. In geographic footprint and density of those served. In products offered and global brands as well as its own brand recognition.
  • Market presence in areas of forecast demographic growth of population, population density, disposable income, and favorable long term currency exchange rates trends for the company's home markets of Brazil and Chile relative to the U.S.dollar
  • A strongly correlated chart pattern for entry and exit of share holdings, based on the golden cross and reversal called by the death cross, providing signals for long term portfolio management of long and short positioning.

This looks to me like one alpha served just the way you like it.

Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in OTCPK:BOBS over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Source: Your Portfolio Can Get Fat On Fast Food In Brazil