CBRL Investment Analysis Report & Stock Research, Cracker Barrel Old Country Store, Inc.

Ockham's Rating/Recommendation Summary

Rating specific information requires Premium Access.
Buy Now or Learn More about Ockham's Features and Services.

CBRL Revenue

As a value investing shop, we are interested in seeing how CBRL's revenues measure up against past performances. One easily understandable way of doing that is to compare Price to Sales per share levels over a given time frame. Assuming it is available, Ockham prefers to look at ten years of history (for this stock there are 10 years of history available) and we weigh recent years more heavily. This allows us to find weighted average historical high and low Price to Sales ratios, which give us a better idea of the stock's current underlying value. Using this method, we have established a high range for Price to Sales of 0.67x and the low end of the range at 0.38x.

With respect to these historically rational metrics, notice that the current Price to Sales per share ratio for CBRL of 0.44x is well below its normal historic Price to Sales levels. At a price of $45.79, CBRL is 17% below where we would expect to see it. Clearly, this stock looks undervalued compared to historical levels, at least on a Price to Sales basis. This will positively affect our analysis because it is rare to find a stock this far below historical norms, and we would expect some price appreciation to bring this metric back towards a more normal range.

CBRL Cash Earnings

As a value investment framework, Ockham Research is similar to a private equity firm in terms of our valuation methods. We are always on the lookout for value in the form of sales and cash numbers. In the case of CBRL, Ockham views their current Cash Earnings as below their historical average multiples of Cash Earnings, as calculated by our proprietary analysis. It is incredibly important to understand that for CBRL, the current level of Cash Earnings compared to its historical levels helps identify where CBRL is in relation to what the investing community was willing to pay for this level of Cash Earnings in the past. With a historical high Cash Earnings per share ratio of 9.77 and a historical low Cash Earnings per share ratio of 5.36, an investor can relate where value becomes optimal.

So what does a Cash Earnings ratio below the historical norm mean for CBRL? Generally, CBRL's investors have paid slightly higher stock prices for this level of Cash Earnings, which bodes well as a return to historical norms is statistically likely. However, it is never a guarantee that history gives us proper direction, particularly in fluctuating market cycles. So by utilizing a long term view and incorporating other areas of analysis (like Sales, Dividends, and management analysis), each investor can gain a more complete view of CBRL. Remember, that the average Cash Earnings level for CBRL has been 7.57, so the current Cash Earnings level of 7.54 is a positive in our view, but by no means is it overwhelming.

CBRL Dividends

A strong dividend payment history is looked upon as a favorable characteristic on a company’s future and potentially can receive a positive Ockham rating. That being said, we don't require dividend payments for company's whose management has elected to forgo them entirely.

When reviewing dividend yields for CBRL, we compare the historic high and low levels over the past, which is similar to our evaluation of Sales and Cash Earnings per share. Paying a dividend is not necessary for any company, but changes in dividend often can lend clues as to the health of the business. A rising dividend is a strong sign for an established company, as it reflects management's confidence in the company. CBRL’s estimated annual dividend is $0.80 resulting in a current dividend yield of 1.75%. The highest dividend yield from CBRL over recent history was 7.29% while the lowest dividend yield was 0.05%. It is never a good sign for a company to pay significantly lower dividends, in this case 52.32% below the median yield. Although, dividends are a relatively small portion of our analysis framework, we still see this as a negative factor.