NEW YORK (TheStreet) -- Shares of Carrols Restaurant Group (TAST) are up 8.98% to $7.67 in midday trading Monday on reports of the merger between Burger King Worldwide (BKW) and Tim Horton's (THI) .
Carrols signed definitive agreements to purchase 64 Burger King restaurants last Friday from subsidiaries of Heartland Food LLC for a total cash purchase price of about $18 million.
The merger could be considered a corporate inversion in which Burger King would acquire the Ontario, Canada-based Tim Hortons and move headquarters to Canada, which would lower their overall corporate taxes.
Separately, TheStreet Ratings team rates CARROLS RESTAURANT GROUP INC as a Sell with a ratings score of D+. TheStreet Ratings Team has this to say about their recommendation:
"We rate CARROLS RESTAURANT GROUP INC (TAST) a SELL. This is driven by some concerns, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. Among the areas we feel are negative, one of the most important has been poor profit margins."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The gross profit margin for CARROLS RESTAURANT GROUP INC is rather low; currently it is at 16.02%. Regardless of TAST's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, TAST's net profit margin of -1.14% significantly underperformed when compared to the industry average.
- In its most recent trading session, TAST has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. Turning our attention to the future direction of the stock, we do not believe this stock offers ample reward opportunity to compensate for the risks, despite the fact that it rose over the past year.
- Regardless of the drop in revenue, the company managed to outperform against the industry average of 5.6%. Since the same quarter one year prior, revenues slightly dropped by 2.8%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- CARROLS RESTAURANT GROUP INC 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 year. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, CARROLS RESTAURANT GROUP INC continued to lose money by earning -$0.59 versus -$0.83 in the prior year. This year, the market expects an improvement in earnings (-$0.40 versus -$0.59).
- 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 44.7% when compared to the same quarter one year prior, rising from -$3.50 million to -$1.93 million.
- You can view the full analysis from the report here: TAST Ratings Report
EXCLUSIVE OFFER: See inside Jim Cramer's multi-million dollar charitable trust portfolio to see the stocks he and Stephanie Link think could be potentially HUGE winners. Click here to see the holdings for FREE.