Playtime For Dave & Buster's As Earnings Approaches

| About: Dave & (PLAY)

Summary

PLAY has shown better-than-expected returns in each of the trailing quarters, and the stock has been reacting well to earnings.

Analysts have revised both their 2016 and 2017 earnings expectations upward in response to PLAY's unexpected Q3 revenue increase.

By comparison, Chipotle has reported weak earnings, especially following the food poisoning incidents.

PLAY appears to be a solid investment choice at this time; we recommend buying.

Dave & Buster's: A Strong Player

Dave & Buster's Entertainment (NASDAQ:PLAY) has consistently posted surprisingly positive results ever since it began trading in October 2014 after its IPO. The company has shown a positive earnings average of 101.23% in the prior four quarters. It is scheduled to release its fourth-quarter earnings report on March 29 after the close of trading.

Impressive Early Performance
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Source: Nasdaq.com

In the third quarter, PLAY reported a revenue increase of 17.5% and an earnings-per-share growth of 300%, surprising analysts. This followed a second-quarter revenue increase of 16.7% and a first-quarter revenue increase of 14.7%. In light of the company's continued strong growth and performance, analysts have revised growth estimates for 2016 by 9.2% and for 2017 by 8.5%. At the same time, the share price has fallen as people have been selling growth stocks. This places the stock in a good position for investors.

Comparison With Competitors

Competitor Chipotle Mexican Grill (NYSE:CMG) took a big hit with the problems it had with customers getting sick from norovirus after eating in the company's restaurants. In one year, the company's comps had fallen by 26.1% by the end of February. In order to combat its weak financial reports and the criminal investigation into the company's food poisoning problems, Chipotle has engaged in a number of different promotions aimed at wooing customers back, including free guacamole through an online game, buy-one-get-one offers, and other things. Taken together, these might help Chipotle improve as the memory of the food-poisoning issues fade with time, but they are not helpful to the company's immediate future as free food does little to improve revenue numbers.

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Source: Nasdaq.com

Conclusion: Buying Opportunity Ahead of March 29 Earnings

Dave & Buster's continues to show growth beyond expectations in each successive quarter. If the growth continues, the stock could potentially be a terrific choice for investors. For the past four quarters, PLAY has gapped up an average of 5.66% on earnings and continued to move up 6.56% on average over the first full trading day. One week after earnings, the stock has moved up on average 7.27% from the initial price at the time of the report. We see an excellent opportunity to buy PLAY ahead of March 29 earnings and take advantage of the potential surge. As a longer-term hold, PLAY looks quite fun.

Disclosure: I am/we are long PLAY.

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.