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Denny's on watch after Oppenheimer sees rally extending

Sep. 19, 2019 9:12 AM ETDenny's Corporation (DENN) StockDENNBy: Clark Schultz, SA News Editor
  • Oppenheimer is out with a strong endorsement of Denny's (NASDAQ:DENN), starting off coverage with an Outperform rating and calling the restaurant stock a "compelling" investment story.
  • "Its transformative refranchising initiative unlocks significant capital returns, elevates its FCF profile and improves the unit growth outlook. At the same time, fundamentals appear healthy with attractive SSS catalysts in place to sustain outperformance against the industry. Despite being up 59% since October 2018 and trading at an elevated valuation, we are positive on the upside potential from the model transformation and strengthening earnings growth," reads the meaty part of the Oppenheimer note.
  • Oppenheimer assigns a price target of $27 to Denny's, which it says represents 18X EV/EBITDA and a ~4% FCF yield off the 2021 estimates. "While this sits at a slight premium to peers, we believe it is justified by above-average capital returns, rock-solid fundamentals and a strong management team," notes the firm.
  • Denny's isn't widely covered on Wall Street, but three out of the five sell-side firms with eyes on it have a Buy-equivalent rating and the other two are at Hold.
  • Shares are inactive in the premarket session. For the year, Denny's is up 39%.

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