This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Einstein Is Brilliant Restaurant Stock

Stocks in this article: BAGL CMG PNRA

BOSTON ( TheStreet) -- Small-cap stocks are in a bad place, as investors are favoring safe-haven fixed-income securities because of the wobbly U.S. economy.

The Russell 2000 tumbled 4% yesterday as the U.S. trade gap widened more than economists expected, prompting them to lower their forecasts for gross domestic product growth. Yet, pessimism creates opportunity for value investors.

Einstein Noah Restaurant Group (BAGL), whose ticker denotes its principal product, has risen 9% in 2010, beating the Russell 2000. (Einstein has declined 2.4% since tracking started of the Under-the-Radar Top 10 Portfolio on March 1.) Although the company registered lackluster quarterly numbers, its stock remains an attractive value. And the unwavering support of hedge-fund manager David Einhorn, whose Greenlight Capital is Einstein's largest shareholder, is a reassuring sign to individual investors.

Second-quarter adjusted profit decreased 23% to $3.1 million, or 19 cents, from $4 million, or 24 cents, a year earlier. Revenue declined marginally to $103 million. The gross and operating margins remained steady at 20% and 7%, respectively. System-wide comparable store sales declined 1.1% and company-owned same-store sales fell 2.2%. Although quick-casual favorites Chipotle (CMG) and Panera (PNRA) boosted comparable-store sales by high single-digit percentages, Einstein's shares are significantly cheaper than those of the restaurant darlings.

Management is aggressively expanding. Einstein opened one company-owned restaurant, four franchises and four license restaurants during the quarter. It plans to open 10 to 12 company-owned, 12 to 17 franchises and 35 to 46 license restaurants this year. Franchise and license revenue increased 17% during the quarter, ranking as the leading sales category. The company's balance sheet has improved since the year-earlier quarter. Last year's shareholders' deficit has turned into shareholders' equity and the cash balance has more than doubled to $10 million since the year-ago period.

Einstein has attracted a slew of loyal shareholders. Greenlight holds almost 11 million shares, about 65% of those outstanding. Royce & Associates, a small-cap investment specialist, is the next largest shareholder, with 3.9% of shares outstanding. It enlarged its position in the latest quarter while Fidelity initiated a 1.8% stake. Greenlight's huge bet on Einstein has attracted a slew of sell-side analysts who normally wouldn't cover a restaurant stock with a paltry market value of $180 million. Technically, Einstein is a micro-cap.

1 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 18,030.21 +6.04 0.03%
S&P 500 2,081.88 -0.29 -0.01%
NASDAQ 4,773.4720 +8.0480 0.17%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs