P.F. Chang's On The Rebound

Dec.27.11 | About: P.F.Chang's China (PFCB)

A stock that seems to have hit a support level and may be destined for a rebound is P.F. Chang's China Bistro (NASDAQ:PFCB). The company has had some hard times recently but is reworking its menu items and prices at both PF Chang's and it's more casual Pei Wei locations. I've eaten at both of them, and they seem to be well received in the locations I've visited. Support seems to have been reached back in July, and has been rising slightly beginning in October, as can be seen in this graph provided by Barchart:

P.F. Chang's China Bistro, Inc., through its subsidiaries, engages in the ownership and operation of restaurants in the United States. The company owns and operates two restaurant concepts, P.F. Chang's China Bistro and Pei Wei Asian Diner. As of January 2, 2011, it owned and operated 201 full service Bistro restaurants and 168 quick casual Pei Wei restaurants; and operated 7 Bistro restaurants in Mexico and the Middle East under development and licensing agreements. The company was founded in 1996 and is based in Scottsdale, Arizona.

Factors to Consider

Barchart technical indicators:

  • 100% Barchart short term buy signal
  • Trend Spotter sell signal that is weakening fast
  • Trading above its 20, 50 and 100 day moving average
  • 7 new highs and up 11.89% in the last month
  • Relative Strength Index 59.73%
  • Barchart computes a technical support level at 30.77
  • Recently traded at 31.56 with a 50 day moving average of 30.18

Fundamental factors:

  • 18 Wall Street brokerage firms have assigned 23 analysts to run the numbers on this company
  • Revenue is expected to be down .50% this year but recover and increase by 3.10% next year
  • Earnings estimates are for a decrease of 19.90% this year, up slightly by .60% next year and average a 13.69% annual increase over the next 5 years
  • These consensus numbers resulted in a mixed forecast with 5 strong buy, 2 buy, 13 hold, 2 under perform and a sell recommendation to clients
  • The P/E ratio of 16.69 is slightly above the market P/E of 14.0
  • The dividend rate of 3.27% is higher than the market dividend rate of 2.30% and is about 60% of earnings forecasts
  • As previously mention a rework of menu items and prices at both of their chains seems to be well received and working

General investor interest:

  • I measure individual investor interest by the readers of Motley Fool, and there is not a lot of interest there
  • 233 reader voted a low 60% that the stock will beat the market
  • The more savvy All Stars also voted 60% for the same result
  • Fool notes that only 46% of the 11 articles about the company were positive

Always look at a stocks price action over the last year against it's competition. While PFCB was down 40% for the year both Benihana (NASDAQ:BNHN) and Brinker (NYSE:EAT) were up 29%:

Summary: P F Chang's in my book is a depressed stock that has hit a support level and may be good for a short-term rebound. In a dicey market, short term traders can make some money buying stocks with upward momentum and keeping tight stop losses. Play either the lower 14 day turtle channel or the 50 day moving average as your stop loss, and you should be able to make a few dollars in the short run.

Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in PFCB over the next 72 hours.