A few updates/notes
Great results from these three companies - increasing my position
Nathan’s Famous (NATH, featured on 8/11 here):
Fiscal Q2’s earnings were stronger than I anticipated, as grocery royalty performance was strong and profitability rebounded in restaurants and food service.
Revenue up 14%
EBITDA up 32.5%
Earnings per share up 70% (thanks in part to lower interest payments)
I have had a few people ask about NATH’s debt levels.
The debt is a non-issue (in my view, it has never been an issue) and particularly not right now. Net debt is only $54M ($108M debt, $54M cash on hand) or less than 1.5X my fiscal 2023 EBITDA estimate.
Debt is fixed and matures in 2025, while the company will earn more interest on its large cash balance.
More importantly, NATH’s stock is still very cheap.
Fiscal year to date, EBITDA is up 19% year-over-year. If we estimate a full-year EBITDA growth of 15%, NATH is trading at just 9.3X EV/EBITDA. This is astonishingly low for the owner of an iconic consumer brand, +100% ROIC business.
Using a 12.5X multiple, NATH stock is worth $98/share, with fair value in my view being closer to $120/share.