Chicago Long

Roundy's: Making A Leveraged Bet (And It's Working)

The size of Roundy's (NYSE:RNDY) leverage is no joke. Yet, the company is financing a bet on rapid growth: it is expanding its upscale chains in the hopes that higher margin cash flow streams will quickly deleverage the balance sheet, leaving the upside for equity holders. The bet is working: its Mariano's Fresh Market chain is quickly taking hold of the Midwest market. If Roundy's can succeed in its quest for increased return on capital invested, and improve its ROE to even a shadow of Mariano's competitor Whole Foods Market (NASDAQ:WFM), then the accelerated debt paydown and improved return on equity will make this stock increasingly attractive to investors.

Roundy's is a Midwest supermarket chain in...

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