Jim Cramer on Del Frisco's Restaurant Group: This Stock Should Be Higher

NEW YORK (TheStreet) -- Shares of Del Frisco's Restaurant Group  (DFRG) rose 0.63% to $20.62 in morning trading Monday after CEO Mark Mednansky appeared on Jim Cramer's Mad Money program on CNBC on Friday.

Del Frisco's is trading slightly above its 52-week lows despite its recent earnings beat of 2 cents a share, 12.7% year-over-year increase in revenue, and a 2.2% rise in comparable-store sales.

Mednansky said the company continues to represent great value and believes there is a lot of upside remaining for Del Frisco's. He noted the company's newest locations continue to perform well and touted Del Frisco's great pipeline of restaurants in development.

"All we need to do is keep moving," he said, and the markets will eventually appreciate the company's value.

Mednansky added that cost control is one of the company's greatest strengths, as maintaining low costs eliminates the need to raise prices. Del Frisco's restaurants also sit on the higher end of the price curve, which means they are not as levered to gas prices.

Cramer said on the show that Del Frisco's stock should be higher, and he added Monday morning that the company's Grille unit is a key one to watch.

"The big worry here is will the Grille unit be able to 'comp' positively. That's the division that could have the best store growth, but remember store growth in itself does not drive success. Same store sales do," he said. "Del Frisco's was not able to deliver last year but this could be the year that the company pulls it off."

Separately, TheStreet Ratings team rates DEL FRISCOS RESTURNT GRP INC as a Hold with a ratings score of C+. TheStreet Ratings Team has this to say about their recommendation:

"We rate DEL FRISCOS RESTURNT GRP INC (DFRG) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its revenue growth, impressive record of earnings per share growth and compelling growth in net income. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself and poor profit margins."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth came in higher than the industry average of 7.0%. Since the same quarter one year prior, revenues rose by 12.7%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • DEL FRISCOS RESTURNT GRP INC has improved earnings per share by 21.1% 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. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, DEL FRISCOS RESTURNT GRP INC increased its bottom line by earning $0.70 versus $0.51 in the prior year. This year, the market expects an improvement in earnings ($0.95 versus $0.70).
  • DFRG has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.40 is very weak and demonstrates a lack of ability to pay short-term obligations.
  • The gross profit margin for DEL FRISCOS RESTURNT GRP INC is rather low; currently it is at 24.62%. Regardless of DFRG's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 7.18% trails the industry average.
  • DFRG has underperformed the S&P 500 Index, declining 22.46% from its price level of one year ago. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
  • You can view the full analysis from the report here: DFRG Ratings Report

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