Altman Z-Score, Trailing 12 Months: 2.9
Altman Z-Score, Last Fiscal Year: 2.58Sonic (SONC - Get Report) Sonic's Z-Score improved since last year, and at a reading of 2.9, it's nearly beyond a risk of bankruptcy. RealMoney.com contributor Alan Farley asserted that Sonic treads the same demographic waters as chronically underperforming Wendy's/Arby's (WEN - Get Report), with high market saturation and slowing growth. The stock's been a poor performer in the last few years from a technical standpoint, he said, dropping into an ascending triangle pattern that's been in place since September 2008. TheStreet analyst Jake Lynch noted that the quick-service restaurant chain, which sells burgers, fries and shakes at some 3,000 drive-in locations, has steadily improved its business in the past few quarters. It's also cheap on the basis of earnings and cash flow, he said, reporting that Morningstar values the equity at $13, suggesting a potential return of 44% as fundamentals strengthen.
Even so, Sonic's stock has been a perennial laggard since the recession, falling from a high of $25.09 in 2007 to less than $9 earlier this year. Lynch put that performance into context, noting that shareholders have endured an annualized decline of 25% since 2008. Sales and net income dropped 12% and 25% annually, on average, over that span. Morningstar, seeing value in the depressed equity, upgraded it to five stars, the researcher's highest rating, on Dec. 31, Lynch reported. Stressing margin buoyancy and uniqueness of format, Sonic is Morningstar's preferred play in the QSR, or quick-service restaurant, space. On June 22, Sonic posted a fiscal third-quarter loss of $4.7 million, or 8 cents loss per share. On an adjusted basis however, excluding costs associated with the early extinguishment of debt, earnings came in at 21 cents per share. Revenue rose 4.2% year-over-year to $152.1 million in the May-ended quarter. The average estimate of analysts polled by Thomson Reuters was for earnings of 18 cents a share on revenue of $151.4 million. Systemwide same-store sales increased 3.9%, including a 3.6% uptick at franchised drive-in locations and 6.5% at company-owned restaurants.