This Day On The Street
Continue to site right-arrow
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
TheStreet Open House

Bankruptcy Watch: 14 Risky Restaurant Stocks

Sonic (SONC - Get Report)

Content on this page requires a newer version of Adobe Flash Player.

Get Adobe Flash player

Altman Z-Score, Trailing 12 Months: 2.9

Altman Z-Score, Last Fiscal Year: 2.58

Sonic (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. 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.


3 of 16

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

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
Stocks Under $10

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

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Try it NOW
Only $9.95
Try it NOW
14-Days Free
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

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
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

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

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
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!
DENN $11.55 0.00%
DPZ $101.05 0.00%
RRGB $86.56 0.00%
RUTH $15.57 0.00%
RT $6.01 0.00%


DOW 17,712.66 +34.43 0.19%
S&P 500 2,061.02 +4.87 0.24%
NASDAQ 4,891.2190 +27.8570 0.57%

Partners Compare Online Brokers

Free Reports

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