An Orlando outfit became the number one casual dining operator in North America by offering multiple dining experiences to the critical family crowd.
Darden Restaurants (NYSE: DRI) operates more than 1,300 casual dining restaurants in the United States and Canada. Its Red Lobster (seafood), Olive Garden (Italian cuisine) and Bahama Breeze (Caribbean items) chains cater to families, with mid-priced menu items and suburban locations. A small group of Seasons 52 restaurants feature a casual grill and wine bar concept. Brinker International (NYSE: EAT) and Chipotle Mexican Grill (NYSE: CMG) are competitors.
The company pleased investors last month, when it reported fiscal Q1 EPS of 73 cents and revenues of $1.47 billion. Analysts had been expecting 70 cents and $1.45 billion. Management also guided FY08 revenues to about $6.25-6.31 billion, versus consensus of $6.08 billion. The company confirmed that it plans to buy back $125-175 million of its common stock in FY08.
The news popped the shares out of an early September "cup" into the late September "handle" of a Cup & Handle formation. The price is now showing signs of completing the pattern with a bullish rise from the right-hand side of the "handle."
Brokers recommend the stock with four "strong buys," six "buys," six "holds" and one "sell." The DRI P/E ratio (16.25), PEG ratio (1.36), Price to Sales ratio (1.08), Price to Cash Flow ratio (10.32), Price to Free Cash Flow ratio (27.63), EPS Growth rate (19.67%), Return on Assets (13.03%), Return on Investment (19.72%) and Return on Equity (31.81%) compare favorably with industry, sector and S&P 500 averages. Institutions hold about 81% of the outstanding shares. The stock is one of those used to calculate the S&P 500 Index. Over the past 52 weeks, it has traded between $38.11 and $47.60. A stop-loss of $37.80 looks good here.
Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com.
Closing Bell: Economic Catapult for Thanksgiving & Black Friday (WMT, TGT, GRMN, GOOG, MSFT)
Deere up on Q4 earnings performance
Reid Hoffman: LinkedIn will go public (at some point)
