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Biglari's Valuation Puzzling as Cracker Barrel Soars

NEW YORK ( TheStreet) - Cracker Barrel (CBRL - Get Report) did it again. Another solid earnings report sent shares up 6.5% Monday, and while the market fell Tuesday, Cracker Barrel was up another 0.7%.

My favorite country restaurant chain beat analysts' estimates on revenue and earnings, and its stock is trading at an all-time high, making a push toward the $100 mark. The company also increased its quarterly dividend 50% to 75 cents, which equates to a 3.1% yield. Since April 2012, the company has tripled its dividend. CBRL Chart CBRL data by YCharts

Cracker Barrel has also strengthened its balance sheet: The company ended the latest quarter with $400 million in debt, down from $900 million in debt in 2006. Still real estate rich, Cracker Barrel owns more than 400 of its locations. It's been an attractive story over the years, and some institutional buyers have noticed.

Take Biglari Holdings (BH - Get Report), which has amassed a 20% stake in Cracker Barrel.

CEO Sardar Biglari has been vocal about changes he believes need to be made at Cracker Barrel. He has twice sought seats on the company's board of directors and lost both times.

Cracker Barrel wants Biglari to go away. It adopted a poison pill that limits outside ownership to 20%, and in February, it offered to buy Biglari's stake at then market prices. Biglari declined, and that stake, worth about $310 million at the time of the offer, is now worth $456 million.


Sardar Biglari may look like a genius for taking a large position in Cracker Barrel, but his issues with the company have all but fallen on deaf ears. Whether he is right or wrong, it is difficult to build a case calling for change when Cracker Barrel's shares are up more than 50% year to date.

Shares of Biglari, meawhile, are up just 5% year to date. Considering that Biglari's market cap is just $505 million, and the company owns $456 million worth of Cracker Barrel, something is wrong. Biglari's valuation places a very low value on the firm's other assets, which include the Steak n Shake and Western Sizzlin' restaurant chains, and other investments.

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