Monro Muffler Hits the Gas: Under the Radar

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ROCHESTER, N.Y. (TheStreet) -- The mind-blowing fuel efficiency of General Motors' upcoming Chevy Volt and the Cash for Clunkers program might not be enough to make some Americans ditch their old cars and buy new ones. Even if the recession is lifting, many consumers are still struggling to pay off debt and save.

As people hold on to their vehicles longer, companies that fix cars and sell parts will benefit. One of them is Rochester, N.Y.-based Monro Muffler Brake(MNRO Quote), which operates in the Northeast.

Monro is gaining business as dealerships close, eliminating competition for its car services. The company opened 30 stores during the quarter the ended in June, bringing its total to 740. Sales at stores open at least a year increased 6.2% during that quarter after an 11% rise in the previous quarter. That trend will likely continue as consumers delay new-car purchases.

The company's fiscal first-quarter net income jumped 21% to $9.4 million, or 46 cents a share, as revenue rose 6% to $128 million. Monro raised prices during the quarter, helping to boost its gross margin from 42% to 44%. Its operating margin increased from 12% to 13%. The company recently increased its quarterly dividend to 7 cents.

Still, Monro has room to improve. Its balance sheet holds only $3.4 million of cash, compared to $96 million of debt. But a debt-to-equity ratio of 0.5 reflects a conservative capital structure. We give Monro a financial score of 7.9 out of 10, higher than average for companies we rate "buy," because of its consistent revenue and earnings growth.