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5 Restaurant Stocks With Upside

1. O'Charley's is a multi-concept restaurant company owning and operating three restaurant concepts under the O'Charley's, Ninety Nine and Stoney River Legendary Steaks trade names. The company operates O'Charley's restaurants at 221 locations, Ninety Nine Restaurants at 106 places, Stoney River Restaurants at 11 locations, and franchises or joint ventures of the O'Charley's restaurants at 9 places, as of Dec. 26, 2010.

Of the four analysts covering the stock, 25% recommend a buy while the remaining rate a hold. There are no sell ratings on the stock. On average, analysts estimate 47.1% upside to $9 from current levels.

For 2010 fourth quarter, the company's same-store sales at Ninety Nine Restaurants rose 1.3% from the year-ago quarter, while same-store sales at Stoney River Legendary Steaks increased by 3.7%. Meanwhile, the company offers the best price to free cash flow ratio of 3.9 times and a free cash flow per share of $1.62, which is the highest in the restaurant industry.

Heading into the first quarter of 2011, the company estimates total revenue between $260 and $266 million, income from operations in the range of $3-$6 million and adjusted earnings before interest, taxes, depreciation, and amortization to range between $16 and $19 million. Based on seasonality patterns, average weekly sales per restaurant and restaurant level margins are higher in the first quarter than in the following three quarters.

>>To see these stocks in action, visit the 5 Restaurant Stocks With Upside portfolio on Stockpickr.

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