The Hottest Name in Fast Food is a Newcomer: WEN, MCD, GTIM Compared & Contrasted

Dec 20, 2012 9:31:05 AM PST | 230 View(s) | No Comment(s) - Post a Comment Rating

Print Email

StockHQ:

WEN
$5.98 -$0.01 -0.17%
MCD
$98.81 -$0.94 -0.94%
GTIM
$3.00 -$0.03 -0.99%

Move over Wendy's Company (NASDAQ:WEN), and step aside McDonald's Corporation (NYSE:MCD). There's a new drive-thru name in town, and it's on a roll. Though few didn't expect much from restaurateur Good Times Restaurants Inc. (NASDAQ:GTIM) a year ago, the market started to fall in love with this company - and stock - in November. And, the market did so for good reason.

For perspective, GTIM owns or franchises 41 hamburger and frozen-custard drive-through restaurants. That's not even a drop in the bucket compared to the 34,000 McDonald's restaurants in existence across the globe. It doesn't even compare the 6500 restaurants that fall under The Wendy's Company umbrella. Then again, for investors, everything is relative. Those 34,000 McDonald's stores are co-owned by millions of shareholders splitting various-sized pieces of the $90 billion company. The Wendy's Company - a $1.9 billion organization - also mist split its earnings up among tens of thousands of shareholders. Good Times Restaurants is only a $7 million company, and though it's only produced $20 million in sales (and no profits) for the past four quarters, that's still far more relative revenue than WEN or MCD shareholders can say's been generated for them.

All that being said, the overarching reason to own any company is growth. Good Times Restaurants Inc. has the goods.

In early December the company reported November's same-store sales growth of 6.8%, countering the same-store sales dip of 0.9% for Q3. For comparison, McDonald's same-store sales for November were only up 2.4%.

And earnings? Admittedly, it's tough to get excited about any company that's not currently turning a profit - investors have been burned by promises before. In the case of Good Times Restaurants, however, the company may be close enough to give it the benefit of the doubt.

For starters, GTIM shares are only priced at 0.32 times their trailing revenue. The market average is 2.4, meaning one could make the case that - on a sales basis - shares are only valued a little more than a tenth of the norm. But no profits means the measure is irrelevant? Maybe, but just for the record, Good Times Restaurants' losses are very marginal. It only lost 4.9% of its total sales for the past twelve months, which is miniscule in comparison to many small cap companies that lose millions on only thousands in sales. In other words, with just a few more profitable sales dollars, GTIM truly and plausibly could get over that profit hump. And, given that it's been streamlining the operation for about a year, those incremental profitable sales dollars aren't out of reach, especially seeing its big success with the recently-unveiled breakfast menu.

Bottom line? The chart's suggesting traders are looking for a reason - any reason - to stage a bullish jailbreak. Given the back-story, that's not hard to believe. Speculators may want latch on sooner than later.

Bryan Murphy is a paid contributor of the SmallCap Network. Bryan Murphy's personal holdings should be disclosed above. You can also view SmallCap Network's complete disclaimer and disclosure.