Thursday, December 27, 2007

Brinker International(ticker symbol EAT) trades at .7x sales and 8.5x trailing operating profit. There seems to be a glut of restaurants in most fast-growing suburban marketplaces, which could be a problem if consumer discretionary income falls off and cost-inflation continues to ramp up. All that being said, Brinker's share price has fallen from $35 to $20...they may not have as much hidden real estate value as Darden owns, but it does own more than 1/4th of its stores and owns some strong concepts in Maggiano's, Chili's, and On-theBorder. Now that I mention it, Darden might be a good buy eventually too....

As the chart above shows (w/green line, Brinker is trading at a historically low Price/Sales multiple, my target would be to see it increase from .55x sales to 1x sales, which would be an increase of 90% from current levels.

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