NEW YORK (
) has been upgraded by TheStreet Ratings from hold to buy. The company's strengths can be seen in multiple areas, such as its solid stock price performance, revenue growth, good cash flow from operations, growth in earnings per share and expanding profit margins. We feel these strengths outweigh the fact that the company has had sub par growth in net income.
Highlights from the ratings report include:
- The stock has not only risen over the past year, it has done so at a faster pace than the S&P 500, reflecting the earnings growth and other positive factors similar to those we have cited here. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
- Despite its growing revenue, the company underperformed as compared with the industry average of 10.7%. Since the same quarter one year prior, revenues slightly increased by 3.8%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- Net operating cash flow has slightly increased to $8.10 million or 8.00% when compared to the same quarter last year. In addition, AFC ENTERPRISES INC has also modestly surpassed the industry average cash flow growth rate of 4.71%.
- AFC ENTERPRISES INC's earnings per share improvement from the most recent quarter was slightly positive. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, AFC ENTERPRISES INC increased its bottom line by earning $0.90 versus $0.74 in the prior year. This year, the market expects an improvement in earnings ($0.96 versus $0.90).
- The gross profit margin for AFC ENTERPRISES INC is currently very high, coming in at 71.20%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 16.40% trails the industry average.
AFC Enterprises, Inc. develops, operates, and franchises quick-service restaurants under the trade names of Popeyes Chicken & Biscuits and Popeyes Louisiana Kitchen. The company has a P/E ratio of 17.1, below the average leisure industry P/E ratio of 17.3 and below the S&P 500 P/E ratio of 17.7. AFC has a market cap of $379.3 million and is part of the
industry. Shares are up 9.3% year to date as of the close of trading on Tuesday.
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