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Category: Stock Market and Del Taco
Date: 12 March 2020 Stock Price: $4 We take a look at the 4th quarter earnings release of their 2019 fiscal year of Del Taco Restaurants a restaurant group offering a variety of Mexican and American favorites such as burritos, carne asada steak and slow cooked beans.
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About Del Taco Restaurants
Del Taco (NASDAQ: TACO) offers a unique variety of both Mexican and American favorites such as burritos and fries, prepared fresh in every restaurant's working kitchen with the value and convenience of a drive-thru. Del Taco's menu items taste better because they are made with quality ingredients like fresh grilled chicken and carne asada steak, hand-sliced avocado, hand-grated cheddar cheese, slow-cooked beans made from scratch, and creamy Queso Blanco. The brand's campaign further communicates Del Taco's commitment to providing guests with the best quality and value for their money through cooking, chopping, shredding and grilling menu items from scratch. Founded in 1964, today Del Taco serves more than three million guests each week at its approximately 600 restaurants across 15 states.
Overview of Del Taco's 4th quarter 2019 earnings report
The numbers below refers to the latest quarter unless specified otherwise:
- Total revenue: $157.096 million (down from $157.293million from the same quarter of the previous year)
- Revenues decreased by -0.12% over the last 12 months
- Total operating expenses: $268.865 million (down from $146.597 million for the same quarter of the previous year)
- Total operating expenses increased by 83.4% over the last 12 months
- Some margin pressure on Del Taco as revenues declined while total operating expenses increased substantially but this was largely due to the impairment of goodwill.
- Net loss: -$114.099 million (down from $5.469 million for the same quarter of the previous year)
- Diluted loss per share: -$3.08 (down from $0.15 for the same quarter of the previous year)
- Diluted weighted-average shares outstanding: 37.059 million (up from 37.778 million for the same quarter of the previous year)
- Cash and cash equivalents: $1.421 million
- Cash and cash equivalents per share: $0.55
- Cash and cash equivalents makes up 3.83% of Del Taco's market capital
- Cash and cash equivalents makes up 0.16% of Del Taco's total assets
- Receivables: $3.580 million
- Receivables makes up 0.41% of Del Taco's total assets
- Inventories: $3.123 million
- Inventories makes up 0.38% of Del Taco's total assets
- Stockholders equity in Del Taco's: $302.107 million
- Stockholders equity per share: $8.15
- Del Taco is trading at 0.49 times its stockholders equity which is well outside the expected range of between 2 and 4 times that most firms tend to trade at
- The S&P 500 price to book value is at 3.34 (Click here to find out more details about the S&P 500)
Del Taco's management commentary on their 4th quarter 2019 earnings report
LAKE FOREST, Calif.--(BUSINESS WIRE)-- Del Taco Restaurants, Inc. (“Del Taco” or the “Company”), (NASDAQ: TACO), the second largest Mexican-American quick service restaurant chain by units in the United States, today reported fiscal fourth quarter and fiscal year 2019 financial results for the 16-week and 52-week periods ending December 31, 2019 and issued fiscal 2020 guidance.
John D. Cappasola, Jr., President and Chief Executive Officer of Del Taco, commented, “2019 was a challenging year in which we delivered on our revised financial expectations across key metrics while making solid progress on several strategic fronts that position us well for the future. We successfully entered into the digital landscape, transforming our marketing model and creating future sales opportunities by achieving our goal of making our food available through three integrated delivery service providers and growing the new Del App to over 950,000 registered users currently.”
Cappasola added, “Over the past year, we have made significant progress on our portfolio optimization program. Including the March 2020 refranchising of our restaurants in the Yuma, AZ and El Centro, CA region, we have refranchised a total of 36 restaurants, including three non-core Western markets that included development commitments for an additional 35 franchised restaurants over time. These commitments enhance our franchise growth prospects and have enabled us to slow company openings in 2020 as we shift our focus toward supporting franchise growth and activating our next Company seed market in Orlando, Florida starting in late 2021.”
John D. Cappasola, Jr., President and Chief Executive Officer of Del Taco, commented, “2019 was a challenging year in which we delivered on our revised financial expectations across key metrics while making solid progress on several strategic fronts that position us well for the future. We successfully entered into the digital landscape, transforming our marketing model and creating future sales opportunities by achieving our goal of making our food available through three integrated delivery service providers and growing the new Del App to over 950,000 registered users currently.”
Cappasola added, “Over the past year, we have made significant progress on our portfolio optimization program. Including the March 2020 refranchising of our restaurants in the Yuma, AZ and El Centro, CA region, we have refranchised a total of 36 restaurants, including three non-core Western markets that included development commitments for an additional 35 franchised restaurants over time. These commitments enhance our franchise growth prospects and have enabled us to slow company openings in 2020 as we shift our focus toward supporting franchise growth and activating our next Company seed market in Orlando, Florida starting in late 2021.”
Cappasola concluded, “This year, the combination of reinvigorating our category leading value position and compelling new product innovation are expected to serve as transaction catalysts, while our strategic progress during 2019 on digital initiatives and daypart utilization strategies are expected to improve heavy user frequency. In late January, we reestablished our commitment to price-value with heavy QSR users through the launch of the Del’s Dollar Deals Menu and we are pleased with our initial execution, guest feedback, product mix and improved transaction trends. We will complement our value focus by leveraging our barbell menu strategy with the recent return of premium crispy Jumbo Shrimp and our planned Spring launch of freshly prepared guacamole available with Chips, as a side or addition, and as part of our Epic burrito relaunch.”
Fiscal Year 2020 Guidance
Del Taco is providing guidance for the 52-week fiscal year 2020 ending December 29, 2020.
Fiscal Year 2020 Guidance
Del Taco is providing guidance for the 52-week fiscal year 2020 ending December 29, 2020.
- System-wide comparable restaurant sales growth of low single digits;
- Total revenue between $503 million and $513 million;
- Company-operated restaurant sales between $459 million to $469 million;
- Restaurant contribution* margin between 16.2% and 16.7%;
- General and administrative expenses between approximately 8.6% and 8.9% of total revenue;
- Effective tax rate of approximately 27.0% to 27.5%;
- Adjusted diluted earnings per share* of approximately $0.35 to $0.40;
- Adjusted EBITDA* between $57.0 million and $60.0 million;
- 15 to 20 gross system-wide new unit openings, including 5 company-operated restaurants, and an estimated 1% system-wide closure rate; and
- Net capital expenditures between $33 million to $38 million.
Del Taco Restaurants (NASDAQ: TACO) stock price history
The image below, obtained from Google, shows the stock price history of Del Taco's over the last 5 years, and its not been a good time for Del Taco stockholders. 5 years ago the stock of Del Taco was trading at $10.70 and its currently trading at $4.00. That's a loss of-62.6% suffered by Del Taco stockholders over the last 5 years.
The stock of Del Taco is trading at a lot closer to its 52 week low of $3.81 than it is to its 52 week high of $13.50 which to us is a clear indication that the short term sentiment and momentum of Del Taco's is very negative at this point in time.
The stock of Del Taco is trading at a lot closer to its 52 week low of $3.81 than it is to its 52 week high of $13.50 which to us is a clear indication that the short term sentiment and momentum of Del Taco's is very negative at this point in time.
Recent coverage of Del Taco Restaurants
The extract below discusses the latest earnings report from Del Taco as obtained from Yahoo Finance.
Del Taco Restaurants (TACO) came out with quarterly earnings of $0.18 per share, in line with the Zacks Consensus Estimate. This compares to earnings of $0.18 per share a year ago. These figures are adjusted for non-recurring items. A quarter ago, it was expected that this restaurant chain would post earnings of $0.14 per share when it actually produced earnings of $0.10, delivering a surprise of -28.57%.
Over the last four quarters, the company has not been able to surpass consensus EPS estimates. Del Taco, which belongs to the Zacks Retail - Restaurants industry, posted revenues of $157.10 million for the quarter ended December 2019, missing the Zacks Consensus Estimate by 0.14%. This compares to year-ago revenues of $157.29 million. The company has topped consensus revenue estimates just once over the last four quarters.
The sustainability of the stock's immediate price movement based on the recently-released numbers and future earnings expectations will mostly depend on management's commentary on the earnings call. Del Taco shares have lost about 33.1% since the beginning of the year versus the S&P 500's decline of -10.8%.
Read the full article here
Del Taco Restaurants (TACO) came out with quarterly earnings of $0.18 per share, in line with the Zacks Consensus Estimate. This compares to earnings of $0.18 per share a year ago. These figures are adjusted for non-recurring items. A quarter ago, it was expected that this restaurant chain would post earnings of $0.14 per share when it actually produced earnings of $0.10, delivering a surprise of -28.57%.
Over the last four quarters, the company has not been able to surpass consensus EPS estimates. Del Taco, which belongs to the Zacks Retail - Restaurants industry, posted revenues of $157.10 million for the quarter ended December 2019, missing the Zacks Consensus Estimate by 0.14%. This compares to year-ago revenues of $157.29 million. The company has topped consensus revenue estimates just once over the last four quarters.
The sustainability of the stock's immediate price movement based on the recently-released numbers and future earnings expectations will mostly depend on management's commentary on the earnings call. Del Taco shares have lost about 33.1% since the beginning of the year versus the S&P 500's decline of -10.8%.
Read the full article here
Del Taco (NASDAQ: TACO) latest stock valuation
So based on the 4th quarter and full year 2019 earnings report and 2020 fiscal guidance provided by Del Taco's and what do we value Del Taco's stock at? Based on the earnings reported by Del Taco's our valuation model provides a target (full value) price for Del Taco's at $6.50 a stock.
We therefore believe the stock is undervalued at its current price but we would not recommend long term fundamental or value investors invest into the stock at its current price as the losses will start eating into their cash and eventually their stockholders equity.
We usually recommend that long term fundamental or value investors look to enter the stock at least 10% below our target price (full value price) of $6.50. Therefore we believe a good entry point into Del Taco's stock would be at $5.90 or below.
We therefore believe the stock is undervalued at its current price but we would not recommend long term fundamental or value investors invest into the stock at its current price as the losses will start eating into their cash and eventually their stockholders equity.
We usually recommend that long term fundamental or value investors look to enter the stock at least 10% below our target price (full value price) of $6.50. Therefore we believe a good entry point into Del Taco's stock would be at $5.90 or below.
Next earnings release of Del Taco
It is expected that Del Taco will release their 1st quarter 2020 earnings towards the middle of June 2020