Ruth's Chris Steak House: Awkward Name, Compelling Stock

| About: Ruth's Hospitality (RUTH)

Times are tight, and one of the first ways people cut back on expenses is by eating at home more often. So out the window goes the family night at TGIF or Olive Garden.

But when it comes to celebrating Mom's promotion or Dad's birthday, folks are still willing to pull out the credit card and go somewhere special. Ruth's Chris Steak House, Inc. (NASDAQ: RUTH) is one of these places. It has a solidly established brand as an upscale, special dining experience -- an experience carefully maintained at each of its nearly 100 restaurants in more than 25 cities. And there's more to come. It has a planned growth rate of 14 restaurants a year. It has been cited in many magazines and other media as a "Best Steakhouse," and the magazine Wine Spectator has awarded many of its restaurants accolades of excellence, merely adding to its tony image.

Other steak houses tend to cater to business clientele, and suffer as a result in recessionary times when companies cut back on employee expense accounts. Ruth's Chris smartly has appealed to women, who make up 40% of its guests. But less than one third of Ruth's Chris customers are business clientele, pointing to its ability to survive when economic conditions are rough.

From 2001 to 2005, Ruth's Chris' operating margin averaged 10.6% and has now jumped up to 12.0% as it grows and achieves greater economies of scale.

Type of stock: A chain of steakhouses, Ruth's Chris has established itself as the place people go for a special occasion meal, allowing it to survive even when the economy takes a dip.

Price target: Currently trading in the $19 range, I see this share bouncing past analysts' expectations and hitting $27 in the next year. The revenues -- and its operating margins -- are growing, and the brand is solid.

RUTH 1-yr chart:

ruth\'s chris

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