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, compelling growth in net income, largely solid financial position with reasonable debt levels by most measures and impressive record of earnings per share growth. We feel these strengths outweigh the fact that the company shows weak operating cash flow.
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Highlights from the ratings report include:
- Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period. Although other factors naturally played a role, the company's strong earnings growth was key. 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.
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Hotels, Restaurants & Leisure industry. The net income increased by 42.2% when compared to the same quarter one year prior, rising from $4.12 million to $5.87 million.
- Even though the debt-to-equity ratio shows mixed results, the company's quick ratio of 0.35 is very low and demonstrates very weak liquidity.
- DENNYS CORP reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, DENNYS CORP increased its bottom line by earning $1.14 versus $0.23 in the prior year. For the next year, the market is expecting a contraction of 74.6% in earnings ($0.29 versus $1.14).
- DENN, with its decline in revenue, underperformed when compared the industry average of 8.4%. Since the same quarter one year prior, revenues slightly dropped by 6.7%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
Denny's Corporation, through its subsidiaries, engages in the ownership and operation of a chain of family-style restaurants. The company operates traditional American-style food restaurants under the Denny's brand name. The company has a P/E ratio of 3.6, equal to the average leisure industry P/E ratio and below the S&P 500 P/E ratio of 17.7. Denny's has a market cap of $409.6 million and is part of the
industry. Shares are up 13.3% year to date as of the close of trading on Thursday.
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-- Written by a member of TheStreet Ratings Staff
TheStreet ratings do not represent the views of TheStreet's staff or its contributors. Ratings are established by computer based on metrics for performance (which includes growth, stock performance, efficiency and valuation) and risk (volatility and solvency). Companies with poor cash flow or high debt levels tend to earn lower ratings in our model.