Bloomin' Brands (BLMN) is one of the largest casual dining (medium priced) restaurant chain companies in the world. As of September 30, 2012 , the company owned 1,259 restaurants and had 197 franchised restaurants, across 48 states and 20 countries/territories. There are five original concepts: Outback Steakhouse, Carrabba's Italian Grill, Bonefish Grill, Fleming's Prime Steakhouse and Wine Bar, and Roy's. Bloomin' Brands' market segments include everyday dining, celebrations and business entertainment.
I believe that Bloomin' Brands should achieve my revenue estimates for 2012, 2013 and 2014 of $3.98E billion, $4.23E billion and $4.50E billion, respectively, and believe that it should meet my earnings per share estimates of $0.98E, $1.06E and $1.86E. (Estimated figures are denoted by an "E" following the number.) Assuming that the stock trades at a price/earnings ratio of 33X in 2014, or about this stocks' current multiple, and assuming that the company achieves my earnings per share estimate of $1.86E, this indicates a target price for the stock of $61.38E, versus its current price of about $18.57. (My price target of $61.38E= $1.86E X 33. Regarding the price/earnings ratio of 33X, it is about at a 10% premium to Starbucks (SBUX) current price/earnings ratio of about 30X.) Based on these assumptions, I believe that this stock could be a potential triple in the next two years.
My 2014 earnings per share estimate of $1.86E is based on the company making a projected five percent net profit margin on an estimated $4.50E billion in total revenues. ($4.50E billion X 5.0%/121 million shares = $1.86E) At present, the net profit margins for two competitors, Brinker International (EAT) and Darden (DRI) Restaurants, are about 5.6% and about 5.5%, respectively.
Yahoo! Finance forecasts an average growth rate in earnings per share for Bloomin' Brands of about 17.2% for the next five years, versus about 13.0% projected for the restaurant industry. Currently, Bloomin' Brands' price/earnings to growth ratio is about 1.1X, versus about 1.4X for the industry, and the company's stock price/sales ratio is about 0.56X, versus about 1.27X for the industry, with these figures referenced from Yahoo Finance.
As of 09/30/2012, the company had about $2.9 billion in total assets. About $270 million or approximately 9.3%, was goodwill; and about $556 million or approximately 19.2%, represented intangible assets; but shareholders equity was only about $219 million, or approximately 7.6% of total assets. Furthermore, based on about $31.57 million in net income for the nine months ended 09/30/2012, and about $66.18 million in interest expense for that same period, its interest coverage ratio should be just about 1.48X. Despite this picture, I do not view the company's financial position to be a major issue, assuming that revenues continue to expand.
The company plans to expand its number of stores in the years ahead. In my opinion, the company believes that its opportunities to expand, both in the U.S. and internationally, are currently very attractive.
I have chosen to use Bloomin' Brands' first and largest restaurant chain as a representative to observe the retail operations of the company. My visit to Outback Steakhouse confirmed my previous experience that the quality of the food and service are excellent, and set an industry standard. For example, Outback Steakhouse's appetizer, the Bloomin Onion, has been in existence since Outback Steakhouse started in Tampa, FL in 1988, and the Bloomin Onion's consistent quality has set a high bar for competitors. I got their sirloin steak, cooked medium with just salt and pepper. The steak was excellent, and I would not consider adding steak sauce.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.