Essay On Buffalo Wings


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Buffalo wings


Buffalo wings is the owner and operator of the franchise restaurants. The company operate different chains of restaurants that are meant to supply the people with the unique eating experience. The company also provides alcoholic and nonalcoholic drinks in the business. The company was established in the same line of business’s it has stuck to the business of selling the food products with little diversification since it was asserted. The company has been a major performer in the industry.

Recommendation

Buffalo wings is a buy. This rating comes from the convergence of the positive investment measures. This is the reason behind the stock outperforming the majority of the stocks in the same industry.

SWOT analysis

The ability of the company to run the successful business model can be replicated in different areas. The company has been able to develop a robust growth of the revenue levels. This has led to the increment of the investor confidence in the company. The company has also been capable of attaining stable cash flows from the operations hence the increased investment in the stock. The other strength that the company has is the largely solid financial position that it operates. It has a reasonable level of debt hence it is still liquid. The major weaknesses of the company arises from the low profit levels of the company.

Analysis

The company indicated a higher revenue growth compared to the industry, which averaged at 8.2%. Since the first quarter of the previous year, the revenue of the company managed to rise by 19.7%. However, the growth in revenue did not seem to trickle down to the bottom-line since the earning per share of the company indicated a declining level.

The net operating capital of the company increased to $74.15 million. The increase is representative of 30.16% increase. The firm’s cash flow was also high compared to the industry level that was capped at 0.13%. The company was capable of performing at a higher level compared to the rest of the players in the industry hence the increased development of the company. It was capable of posting higher returns compared to the industry averages. The postings do not indicate better performance in terms of earning per share since the company did not indicate any increase in the earnings per share.

The earning per share of the most recent quarter indicated a slight decrease from the earlier quarter. This issue is by large influenced by the volatility in the earnings in the recent time. However, the decline in the bottom-line does not mean that the company will be facing any decline (Wallstreet, 2015). The earnings per share of the company are poised to increase in the coming years. The company increased the bottom-line in the past year compared to the prior years. The bottom-line for the past year was $4.95 while the same was $ 3.80 one year earlier. The projected increase in the earning per share is poised to be $5.95 compared to $4.95.

The closing prices for the company jumped by 26.79% in the current period compared to the same closing prices in the previous period. The stock has indicated a sharp rise over the past years. The growth has led to the attainment of a certain level that is expensive compared to the rest of the players in the same industry (Ycharts, 2015). The strengths that the company has been able to attain in the previous years have been the main justifications for the recent increment in the value of the stock.

The company does not have any debt that is notable. Therefore, the company has a zero debt equity ratio. This is a sign that is considered as a favorable indicator. The fact that the company has a zero debt equity ratio, there is a high chance that the week acid ration of 0.77 will be source of future issues.

Industry analysis

The company operates in the food service industry, which is made of the hotels, restaurants, cruise lines and theme parks. The issues that drive the demand in the industry are consistent. The factors that drive up the demand levels are manifested in the entire industry setting. The industry has been affected by the terror threats, poor weather and health issue such as the Ebola scare.

The food service industry is a major employer in the United States with the sector employing 12 million people. This makes the industry the second largest employer in the United States. It is second to the United States government (Wallstreet, 2015). The industry has not attained the full potential when it comes to the growth levels. The industry is still growing with the increased in the two income households. The recent years have indicated a roughly rise in the sales of the restaurant by 5%. However, the industry can be classified as mature irrespective of the growth rate that it has depicted over the years. The classification of the industry as mature comes from the small margins and the stiff competition that is characteristic of the industry. The mergers and acquisition activity is witnessed highly in the industry since the competitors seek to spread the fixed costs to more locations.

The industry is affected by the tourism and business travel due to the development of the GDP and the increased consumer confidence, the corporate earnings are vital for the attainment of the success in the industry. The increased capital spending has been a result of the increased demand for the products offered by the industry. However, there are risks of the industry overinvesting in the capital expansion (Ycharts, 2015). In this case, the result will be low occupancy rates. The lower the occupancy rates, the higher the threat exposure to the hotels that are operating as heavily leveraged entities.
Stock analysis

Growth

The company has indicated strong growth over the past years. The measures used to assess the growth of the company include the statement of comprehensive income and the cash flows statement. The company has been able to performance better than the companies that are rates on the same level in the industry (Wallstreet, 2015).

Total return

The company has been capable of increasing the total returns. The company’s returns a reassessed according to the movement of the price of the stock. The stock performance of the company is better than the companies in the industry. However, the price movement is not at the ideal point. There is more that the company ought to implement in order for it to reach the attainable level. The profitability of the company ought to increase even as the revenue increases.

Efficiency

The efficiency measure is concerned with the comparison of the company’s strength and development of the returns on the invested capital. It focuses on the generated income per dollar of invested capital. The company has been able to generate more income per dollar than the majority of the companies reviewed that operate in the same industry. The volatility of the prices of the stock is lower than the rest of the companies in the industry. This is indicative of the stability of the stock (Ycharts, 2015). The solvency of the company is high according to the different rations. Therefore, it has an ability to pay all the debts owned. The company did not perform well in the ratings of the payment of dividends (Ycharts, 2015).

Financial analysis

The gross profit for the final quarter of the financial year 2014 declined compared to the same time in the previous financial years. This decrease arose even after the revenue from the sales increased (Wallstreet, 2015). The decreased profitability with the increase in sales arises from the high costs of operations. The company has a low liquidity. The current quick ration is 0.77. This shows that the company is unable to cover the short-term needs for cash. However, the liquidity has increased from the same period one year ago. This is indicative of an improving status of the cash flows. In the same period, the equity of the company increased by a 23.16 percent. Increases in equity are indicative of the positivist approach to the equity relationship. This means that the value of the company will be improving (Ycharts, 2015). The overall condition of the company indicates that the liquidity measures will lead to potential problems in the future. The development of the financial problems will hinder the investor’s growth. However, these developments can be controlled.

References


Wallstreet,. (2015). Threats Buffalo Wild Wings (NASDAQ:BWLD) Will be Facing in 2015. Wallstreet.org.
Ycharts,. (2015). Buffalo Wild Wings: It’s Time to Go Whole-Chicken. Ycharts.com. Retrieved 15 April 2015, from